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ARE PARENT PLUS LOANS TOO EASY TO GET? NO, THEY’RE TOO HARD

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“Parent PLUS loans under scrutiny,” aired April 14 by public radio’s Marketplace business report, suggests that Parent PLUS’s eligibility criteria make it too easy for parents to borrow for their children’s education.

 In fact, as UNCF (the United Negro College Fund), the nation’s largest provider of student aid to students of color, has pointed out, Congress enacted the PLUS Loan program not as a commercial lending program but precisely to give low- and moderate-income parents access to funds to invest in their children’s college education.

 If anything, the restrictive eligibility standards imposed by the Department of Education in 2011 have made it too hard for parents to take out PLUS loans. Almost half of all parents who apply are denied.  And at historically black colleges and universities (HBCUs), like those that are members of UNCF, two of every three parents’ PLUS-loan applications are denied, including many who previously received loans and had satisfactory repayment records.

 The consequences of these denials have been severe, both for students and the colleges they attend.  In 2012-13, the last completed academic year, the number of PLUS Loan borrowers at all HBCUs dropped by more than 17,000, or 45 percent, compared to 2011-2012.  These denials cost HBCUs $155 million in Parent PLUS Loan revenue— funds that the colleges depended on to maintain academic programs and contain tuition—which by the way, runs on average 30 percent less at UNCF member HBCUs than at comparable institutions.

 The Marketplace piece points with alarm to a single PLUS-loan parent carrying a $100,000 balance—about ten times the average loan granted to students at HBCUs; and to the average outstanding Parent PLUS loan balance, $20,338.  That’s about the same as the price of a three-year-old Toyota. These days, it’s hard for a family to earn a decent living without a means of transportation or a college education.   Isn’t a child’s college education as good an investment as a used car? 

 These young people need a college education to compete in the 21st century job market.  Their parents stand ready to invest in their children’s education.  Both parents and children deserve not to have the door to the middle class pulled shut in their faces by those who got in first.

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UNCF Commends CBC Chair’s Call for Suspension of Parent PLUS Loan Changes

Loan’s Policy Continues to Penalize Low-Income and First-Generation College-Ready Students; Change Will Also Impact HBCUs

Washington D.C. (August 1, 2013) - UNCF (the United Negro College Fund), the nation’s oldest and most successful minority higher education organization, stands in support of Congressional Black Caucus (CBC) Chair Marcia L. Fudge’s statement demanding Parent PLUS Loan changes be suspended. At a time when America’s economy needs college graduates more than ever, and students need a college credential to compete in the global economy, the U.S. Department of Education has taken steps that - for the second year in a row - make it more difficult for students to attend and complete college. Current Parent PLUS Loan Program (PPL) measures make it more difficult for parents to assist their students in paying for college. 

"The CBC demands that the Department of Education immediately suspend use of the new "adverse credit" criteria as a determinant for Federal Parent PLUS Loan eligibility. Thousands of students, particularly those who attended Historically Black Colleges and Universities (HBCUs), have had to abruptly leave school with no clear path to returning. Student enrollment at HBCUs has dropped, which has resulted in a loss of nearly $150 million for the HBCU community. Actions taken by the Department of Education have disproportionally and adversely impacted students across this nation; in particular, more than 128,000 HBCU students. It is time to stop the bleeding." - Statement of CBC Chair Marcia L. Fudge, August 1, 2013 

Parent PLUS is a federal loan program established to help ensure that students who need additional financial assistance after receiving Pell Grants and Stafford loans are able to attend college and earn a degree. Parents who do not have an “adverse credit history” as defined by DoE can obtain Parent PLUS loans to cover the undergraduate college-related expenses of their children up to the full cost of attendance after other grant and loan aid is deducted. 

In October 2011, DoE changed its interpretation of the regulatory definition of “adverse credit history” without providing meaningful advance notice, conducting an impact analysis or seeking stakeholder input. Under the new interpretation, parents with “charge offs” and accounts in collections within the past five years may not receive loans. As a result of this revised Parent PLUS eligibility criteria, college-going plans of thousands of students were disrupted last year when they learned that their parents could not obtain the loans needed to fully cover their tuition and fees for the year. In many cases, parents who had obtained loans for their children in the prior academic year were denied loans for the 2012-2013 academic year. DoE’s change to the eligibility requirements for the Parent PLUS Loan program has hit thousands of families hard as they discover they no longer qualify for financial support to go to college. 

As a result of the Department’s change in credit criteria, over 400,000 students nationwide, including 28,000 HBCU students, initially were denied loans during the 2012-13 academic year. At UNCF institutions, nearly 6,000 fewer students were approved for PPLs during the 2012-13 academic year compared to the previous year, a drop of over 50 percent. This number is equivalent to approximately 10 percent of total enrollment at these institutions. A survey of UNCF Member Institutions revealed a dramatic and unanticipated loss in revenue to the institutions exceeding $50 million, which is continuing to have a crippling effect. 

Based on new, preliminary data from a sample of UNCF Member Institutions, tougher eligibility criteria for PPLs continue to be problematic for many HBCUs for the 2013-2014 academic year that begins in August for many institutions. A preliminary 24 percent approval rate for incoming PPL applications is comparable to the 27 percent approval rate reported by UNCF members in September 2012, but is half the 48 percent approval rate in 2011. In other words, these data indicate that the spike in denials that began last year is continuing. Three out of every four PPL applications are being denied and less than 7 percent of those have been reconsidered and approved. While the reconsideration process is helping a small number of denied students; still, over two-thirds of parents who apply for PPLs to help their students acquire much- needed funds to attend college are being turned away. 

"A college education is an essential investment for individuals and society, paying dividends in increased lifetime earnings, enhanced quality of life, better health and greater civic engagement. For these reasons, President Obama has encouraged all Americans to seek some type of postsecondary education and training," said Dr. Michael L. Lomax, president and CEO of UNCF. "However, for the foreseeable future, most students must borrow in order to meet all of their college expenses. Pell Grants - the cornerstone of federal college assistance - pay only about one-third of college costs today. Some students still have unmet financial need and must turn to their parents for financial assistance. As a new academic year approaches, many UNCF students and families that rely on Parent PLUS loans now stand at the edge of a continuing crisis." 

President Obama established a goal of increasing college attainment in the United States by 2020. In order to meet the “2020 higher education goal,” substantially more minority students must earn college degrees compared with current rates. Yet, the Department of Education’s current PPL policy undermines this national goal - making it harder for students the nation and the economy needs to get the education they deserve. 

Fudge: “Over the past eight months, the CBC has regularly engaged the Department regarding this critical problem. During a hearing in May 2013, Rep. Corrine Brown (FL-05), Rep. Danny Davis (IL-07), Rep. Cedric Richmond (LA-02) and 17 HBCUs testified to the hardships endured since the PLUS Loan eligibility requirement change. The CBC has met with Department of Education Secretary Arne Duncan and sent letter after letter proposing fixes and demanding that something be done.” 

"Enough is enough. We cannot wait another day," CBC Chair Fudge’s statement concluded. 

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Revise student loan programs now to empower HBCUs

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Opinion

College doesn’t resume until August. But the low-income students to whom UNCF (the United Negro College Fund) awards 10,000 scholarships a year are in the final stages of putting together their financial aid packages right now. And they’re worried.

They’re worried because, as of July 1, the interest on the largest federal student loan program, the Stafford loans, doubled from 3.4 percent to 6.8 percent. If Congress doesn’t reverse the rate increase, the average borrower will pay $2,600 more for their college education, according to the Congressional Budget Office. Congress has not yet acted on legislation that would keep the interest rate from doubling.

If Congress doesn’t fix that situation, and fast, it will be a double whammy on the low-income students who most need a college education — and whom we, as a nation, most need to go to and through college.

The squeeze on low income students

And if the squeeze on low income students who aspire to college wasn’t tight enough, many are facing a second year without support from the federal Parent PLUS loan program. That’s because before the 2012-13 academic year, the U.S. Department of Education, without public notice, changed the eligibility standards for this, one of its most important college loan programs, excluding tens of thousands of families, many of whom had used the program before with satisfactory repayment histories.

Students lost $1.2 billion in college financial assistance as a result of the new eligibility standard, The Washington Post reports. Nearly 160,300 fewer parents received PLUS Loans in the 2012-13 academic year than the year before due to the tighter credit screening required by the Department of Education (ED) – resulting in a 19 percent reduction in recipients.

In our network of 37 historically black colleges and universities, Parent PLUS Loan approval rates for families with students attending our HBCUs dropped dramatically after ED changed its criteria, from an average approval rate of 45 percent to only 24 percent. Almost 6,000 fewer students at UNCF institutions were approved for PLUS loans in the 2012-2013 school year compared to the previous year – a number equivalent to approximately 10 percent of total enrollment at these institutions.

Debating with ED over these changes

Throughout the year, we’ve engaged in a disconcerting Parent PLUS debate with Secretary Duncan and Department of Education officials. The Department has changed its appeal process, but only a few denied Parent PLUS families have been given loans. The Secretary points out that children of parents who are refused Parent PLUS loans become eligible for other kinds of loans – but these loans do not fully fund their unmet financial need.

But he is holding fast to the policy decision that triggered the debate: to determine Parent PLUS eligibility not based on criteria designed to send the most kids to and through college, but based on the tougher criteria that commercial lenders charge non-education customers. These criteria exclude too many of our parents and students.

The irony in the Parent PLUS debate and the other financial aid debates swirling around Washington like tumbleweed is that we all agree on what we’re trying to do. President Obama, in his first address to a joint session of Congress, declared his goal of restoring American world leadership through increasing the percentage of its students with college educations. And Secretary Duncan has said, most recently to Roland Martin and Tom Joyner on Tom’s radio show, that in order to achieve that goal, “HBCUs [have] to play a huge role there.”

We need a strategy

We’re all committed to the same goal: At UNCF, it’s called the North Star — increasing the number of African-American students receiving college degrees. But obstacles are being thrown in the way of following that shared aspiration. What are those obstacles, and how can we get them out of the way?

From its first days in power, the Obama administration pursued — and devoted major resources to — a well-thought-out strategy to move children from pre-school through high school graduation; everybody remembers the best known piece of that strategy, Race to the Top.

But where’s the to-and-through-college strategy? There are programs aplenty: Pell Grants, Stafford Loans, Perkins Loans, Strengthening HBCUs and Parent PLUS.

But without a unified strategy, you get what’s happening with Parent PLUS and the increased 6.8 percent Stafford Loan rates: different programs pulling in different directions, sometimes in opposite directions, impeding success.

Bringing stakeholders to the table

We just finished our nation’s Independence Day celebrations; maybe we should take a cue from the founding fathers and structure a process that includes the consent of the governed.

Making policy behind closed doors, without negotiated rulemaking in place, runs the risk that only a narrow range of perspectives and interests are represented – and all too often those excluded are those most directly and severely affected. It risks resulting in the wrong policy, which is what we believe happened here.

It engenders misunderstanding and mistrust among those who were not consulted. It denies stakeholders like students, parents and colleges time to prepare. And because our seven decades of experiences teach us that social reform has a much greater chance of success when the beneficiaries of reform are included in the process, a closed-door policy diminishes the chance that whatever the final policy turns out to be is the right policy.

Please: Hold the students harmless

Making policy the right way is never fast. But the students whose education is our most precious asset live on a faster-moving schedule and one far more sensitive to disruption. Reaching the right policy six months or a year from now will be no consolation to the students who have dropped out of school because of the denial of Parent PLUS loans.

They need to be held harmless. We know who they are. If they managed to stay in school, let’s do what it takes to keep them there. If they had to drop out, let’s do what it takes to get them back.

The administration could restore the former Parent PLUS eligibility standards — pending the development of a comprehensive to-and-through-college strategy. Or it could find another program or another source of funds to do what needs to be done. The current policy situation isn’t the students’ fault. Let’s not make them pay for it.

The Department of Education needs to start all over from the beginning. Return to the previous credit standards and review them in an open, transparent process. Announce what standards the Department thinks should be in place, allow the affected public to respond, and then change, if necessary, the credit criteria. Even better, the Department should undertake a comprehensive retooling of the Parent Plus program so that interest rates are lower and made more reasonable, and parents get better counseling on the right amount to borrow and repayment options.

That is an open process that arrives at a fully considered public policy.

Our students deserve no less.

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How Can More Black People Finish College?

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Ask Dr. Lomax: It’s not just about getting in but about getting that degree. These programs help.

"What is being done to help black college students actually finish college?" —Ellis Anthony Sutton Jr

It’s a popular topic today: how can we help more black children get into college? For a long time, people defined our national education goal as getting into and going to college. Now I think everybody is coming to understand that our goal has to be bigger than that- finishing college and earning a degree. There are many challenges to staying in college and they are different for freshmen and sophomores than for juniors and seniors.

In my recent post to TheRoot.com “Ask Dr. Lomax” blog, I discuss how getting on the right rack early, and addressing financial and social challenges to staying in school throughout, can help students graduate and ensure better futures for them — and for us all.

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How Early Should I Prep My Kid for College?

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 Ask Dr. Lomax: Use these tips to get your child on the right track.

 By: Michael Lomax | Posted: March 14, 2013 at 12:50 AM

(Special to The Root) —

“What is the best way to prepare your young child for his or her educational future? My son is only 10 years old, but I had him start a college journal last year. In it he states what college he wants to attend, what he would like to study, what classes he will need to take to graduate, approximate cost of tuition, etc. I realize this is very early for a child to be involved in such activity, but my plan is to cause him to think about college early on and have an idea of the things it takes to get there and, more importantly, complete college with his degree. Any insight I can get to help both him and myself prepare is well-needed and would be greatly appreciated. Also, how important are academic-club involvement when applying to a prestigious college?”

 —Escherica Medley

It may seem too early, but all parents should begin to get their children on the college track in middle school, if not before. There are things that any parent can do— having your child start a college journal, encouraging conversation about where he wants to go to college and what he might want to study — that can start your child on the road to college success. Most likely, he’ll change his mind dozens of times before he applies to colleges and picks a major, but what’s important is for him to be thinking about them, to be on the college track not only in the things he does to prepare but also in his own mind.

Recently I had the opportunity to address this topic in my weekly column on “Ask Dr. Lomax” on TheRoot.com. I hope you enjoy what I wrote and I’d love to hear your thoughts about other ways that you can get your child college ready even in middle school

 

Dr. Michael Lomax on The Black List Volume Three (by blacklist)

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