Parents May Soon Find it Easier to Obtain College Loans Under New Plan:
- In 2011, it became increasingly difficult to obtain a Parent Plus loan. This has especially affected many poor families, who find it difficult for their children to attend undergrad and graduate school without loans.
- For a parent with negative credit history, it is much more difficult to secure funding for their child to continue their education.
- The Obama Administration has proposed a revision with respect to the current Parent Plus loan screening process. If the proposed plan goes into effect, when doing its standard credit check, instead of going back five years, the Education Department will only go back two years. Additionally, if there is a debt below $2,085, it will not be considered as a reason to reject a loan application. Under the current policy, delinquencies of any amount can be a bar to gaining access to student loans. The Administration projects that this change in policy will lead to at least an additional 370,000 individuals being approved for loans.
- Proponents of this policy change see it as a way to increase low-income students enrollment in higher education. Currently, Stafford Loans, which are an option for undergraduate students are capped at $57,000 for life. Many times, this is not enough to meet education costs, and it is even more difficult to obtain private loans if a parent has negative credit history.
- Critics are concerned that borrowing large sums of money will lock individuals into repayment for a lifetime, and they have compared it to the housing market crash that occurred when banks were approving mortgages that were unrealistically high compared to a person’s income. They also point to the fact that student debt has doubled since 2007, and it is now $1.1 trillion.
- The Obama Administration’s goal is to create a policy that will increase college and graduate school enrollment rates amongst poor families without burdening them with over borrowing or excessive tuitions.