iHaveNet.com Financial Aid Group Calls on Feds to Shore Up Lending to Parents | Education News
Movies, Movie Reviews & Movie Trailers | The Movies Review Site

by Marian Wang

As we reported last year, parents are increasingly borrowing through a federal program to fund their children's college education. Called Parent Plus, the program has no hard limits on what parents may borrow — providing easy money but few options to help manage the debt burden if the bills prove too much.

A new report by the National Association of Student Financial Aid Administrators recommends reining in the potential for overborrowing, saying the government should tighten underwriting standards for parent loans.

Right now, parent borrowers applying for the loans need only pass a backward-facing check for lapsed debts in their credit history — debt-to-income ratio isn't considered. As a result, the report notes, some parents "accumulate PLUS loan debt over several years that far exceeds their ability to repay."

As we reported, financial-aid officers themselves are sometimes demure when it comes to warning families about borrowing beyond their means. And some schools actually encourage the parent loans by plugging them into the financial-aid packages sent to students.

The report acknowledges the authority of financial-aid administrators to do more to prevent overborrowing, but explains why they are often skittish:

Currently, financial aid administrators are allowed to evaluate a borrower's ability to repay a PLUS loan through debt-to-income measures. However, financial aid administrators have little loan underwriting expertise and are reluctant to use this authority. To ensure consistency, it would be more appropriate for ED, as the lender, to evaluate parental ability to repay using a debt-to-income ratio or similar standard as part of the credit review process already in place.

The Education Department has made a modest effort to try to curb overborrowing of Parent Plus loans —an effort that caused enrollment to drop at some schools that rely heavily on the loans.

In October 2011, the Department of Education tweaked what it considered "adverse credit history," expanding the category to include charged-off debt and unpaid collection accounts. Morehouse College — the all-male historically black college where the average Plus loan amount topped $22,000 in 2010-2011 — had to furlough staff, citing the tweak to the parent loan program.

For-profit company Education Management reported feeling the effects as well in its latest annual report, noting that its Art Institutes were particularly hard hit. "PLUS program loans represented 12.4% and 12.8% of our net revenues in fiscal 2012 and fiscal 2011, respectively," the company stated.

Further tightening of the Plus loan criteria has the potential to set some in higher ed on edge. But the report suggests that at least within college financial aid offices, there's some sense that program does indeed need fixing.

 

More EDUCATION NEWS ...

EDUCATION NEWS ...

 

More EDUCATION NEWS ...

 

Article: Provided by ProPublica.org.

"Financial Aid Group Calls on Feds to Shore Up Lending to Parents"

 

 

 

job title, keywords, company, location