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.