Vol. 79 Friday, 

No. 153 August 8, 2014 

Part VI 

Department of Education 

34 CFR Part 685 

William D. Ford Federal Direct Loan Program; Proposed Rule 

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46640 Federal Register / Vol. 79, No. 153 / Friday, August 8, 2014 / Proposed Rules 

DEPARTMENT OF EDUCATION 

34 CFR Part 685 

[Docket ID ED–2014–OPE–0082] 

RIN 1840–AD17 

William D. Ford Federal Direct Loan 

Program 

AGENCY: Office of Postsecondary 

Education, Department of Education. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Secretary proposes to 

amend the regulations governing the 

William D. Ford Federal Direct Loan 

(Direct Loan) Program. The Secretary is 

proposing to amend these regulations to 

strengthen and improve the 

administration of the Federal Direct 

PLUS Loan Program authorized under 

title IV of the Higher Education Act of 

1965, as amended (HEA). 

DATES: We must receive your comments 

on or before September 8, 2014. 

ADDRESSES: Submit your comments 

through the Federal eRulemaking Portal 

or via postal mail, commercial delivery, 

or hand delivery. We will not accept 

comments submitted by fax or by email 

or those submitted after the comment 

period. To ensure that we do not receive 

duplicate copies, please submit your 

comments only once. In addition, please 

include the Docket ID at the top of your 

comments. 

If you are submitting comments 

electronically, we strongly encourage 

you to submit any comments or 

attachments in Microsoft Word format. 

If you must submit a comment in Adobe 

Portable Document Format (PDF), we 

strongly encourage you to convert the 

PDF to print-to-PDF format or to use 

some other commonly used searchable 

text format. Please do not submit the 

PDF in a scanned format. Using a printto-PDF format allows the U.S. 

Department of Education (the 

Department) to electronically search and 

copy certain portions of your 

submissions. 

• Federal eRulemaking Portal: Go to 

www.regulations.gov to submit your 

comments electronically. Information 

on using Regulations.gov, including 

instructions for accessing agency 

documents, submitting comments, and 

viewing the docket, is available on the 

site under ‘‘Are you new to the site?’’ 

• Postal Mail, Commercial Delivery, 

or Hand Delivery: The Department 

strongly encourages commenters to 

submit their comments electronically. 

However, if you mail or deliver your 

comments about the proposed 

regulations, address them to Jean-Didier 

Gaina, U.S. Department of Education, 

1990 K Street NW., Room 8055, 

Washington, DC 20006–8502. 

Privacy Note: The Department’s policy is 

to make all comments received from 

members of the public available for public 

viewing in their entirety on the Federal 

eRulemaking Portal at www.regulations.gov. 

Therefore, commenters should be careful to 

include in their comments only information 

that they wish to make publicly available. 

FOR FURTHER INFORMATION CONTACT: 

Brian Smith or Pamela Moran at (202) 

502–7551 or (202) 502–7732 or by email 

at: Brian.Smith@ed.gov or 

Pamela.Moran@ed.gov. 

If you use a telecommunications 

device for the deaf (TDD) or a text 

telephone (TTY), call the Federal Relay 

Service (FRS), toll free, at 1–800–877– 

8339. 

SUPPLEMENTARY INFORMATION:

Executive Summary: 

Purpose of This Regulatory Action: 

These proposed regulations would 

update the standard for determining if a 

potential parent or student borrower has 

an adverse credit history for purposes of 

eligibility for a Direct PLUS Loan (PLUS 

loan). Specifically, the proposed 

regulations would amend the definition 

of ‘‘adverse credit history’’ and require 

PLUS loan counseling for a parent or 

student with an adverse credit history 

who is approved for a PLUS loan as a 

result of the Secretary’s determination 

that extenuating circumstances exist. 

The current regulations governing 

adverse credit history determinations 

have not been updated since the Direct 

Loan Program was established in 1994. 

The proposed regulations would amend 

the current regulations to reflect 

programmatic and economic changes 

that have occurred since 1994. 

Summary of the Major Provisions of 

This Regulatory Action: The proposed 

regulations would— 

• Revise the student PLUS loan 

borrower eligibility criteria to state more 

clearly that the PLUS loan adverse 

credit history requirements apply to 

student as well as parent PLUS loan 

borrowers. 

• Add definitions of the terms 

‘‘charged off’’ and ‘‘in collection’’ for 

purposes of determining whether an 

applicant for a PLUS loan has an 

adverse credit history. 

• Specify that a PLUS loan applicant 

has an adverse credit history if the 

applicant has one or more debts with a 

total combined outstanding balance 

greater than $2,085 that are 90 or more 

days delinquent as of the date of the 

credit report, or that have been placed 

in collection or charged off during the 

two years preceding the date of the 

credit report. 

• Provide that the combined 

outstanding balance threshold of $2,085 

may be adjusted over time on a basis 

determined by the Secretary. 

• Revise the provision that specifies 

the types of documentation the 

Secretary may accept as a basis for 

determining that extenuating 

circumstances exist for a PLUS loan 

applicant who is determined to have an 

adverse credit history. 

• Specify that an applicant for a 

PLUS loan who is determined to have 

an adverse credit history but who 

documents to the Secretary’s 

satisfaction that extenuating 

circumstances exist must complete 

PLUS loan counseling offered by the 

Secretary before receiving the PLUS 

loan. 

Please refer to the Summary of 

Proposed Changes section of this notice 

of proposed rulemaking (NPRM) for 

more details on the major provisions 

contained in this NPRM. 

Costs and Benefits: As further detailed 

in the Regulatory Impact Analysis 

section of this document, the proposed 

regulations would affect applicants for 

parent and student PLUS loans by 

modifying the standard for a 

determination of an adverse credit 

history. In particular, a student or 

parent would be considered to have an 

adverse credit history if the student or 

parent has one or more debts with a 

combined outstanding balance greater 

than $2,085 that are 90 or more days 

delinquent as of the date of the credit 

report, or that have been placed in 

collection or charged off during the two 

years preceding the date of the credit 

report. 

The proposed regulations would also 

require that an applicant for a PLUS 

loan who is determined to have an 

adverse credit history but who 

documents to the satisfaction of the 

Secretary that extenuating 

circumstances exist must complete 

PLUS loan counseling offered by the 

Secretary prior to receiving the loan. 

Certain operational changes made by 

the Department in November 2011 

resulted in an increase in the number of 

PLUS loan applicants who were 

determined to have an adverse credit 

history, potentially limiting the 

financial options and resources 

available to those applicants. The 

modifications made in the proposed 

regulations will increase the number of 

PLUS loan applicants who pass the 

adverse credit history check and will 

not have to request reconsideration of 

an initial denial under the Department’s 

process for determining whether 

extenuating circumstances for the 

adverse credit history condition exist. 

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Federal Register / Vol. 79, No. 153 / Friday, August 8, 2014 / Proposed Rules 46641 

We estimate an increase of 

approximately 370,000 PLUS loan 

applicants who will pass the adverse 

credit history check under the proposed 

regulations. 

Under the proposed regulations, 

applicants would not need to apply for 

reconsideration of an initial PLUS loan 

denial due to an adverse credit history, 

saving them time and effort. 

Additionally, because the proposed 

regulations strike a balance between 

increased availability of PLUS loan 

funds to improve student access to 

postsecondary education and helping to 

limit overborrowing through improved 

financial literacy, we believe that there 

will be benefits for both borrowers and 

the Department. 

Invitation to Comment: We invite you 

to submit comments regarding these 

proposed regulations. 

To ensure that your comments have 

maximum effect in developing the final 

regulations, we urge you to identify 

clearly the specific section or sections of 

the proposed regulations that each of 

your comments addresses, and provide 

relevant information and data whenever 

possible, even when there is no specific 

solicitation of data and other supporting 

materials in the request for comment. 

We also urge you to arrange your 

comments in the same order as the 

proposed regulations. Please do not 

submit comments that are outside the 

scope of the specific proposals in this 

notice of proposed rulemaking, as we 

are not required to respond to comments 

that are outside of the scope of the 

proposed rule. See the ADDRESSES

section of this document for instructions 

on how to submit comments. 

We invite you to assist us in 

complying with the specific 

requirements of Executive Orders 12866 

and 13563 and their overall requirement 

of reducing regulatory burden that 

might result from these proposed 

regulations. Please let us know of any 

further ways we could reduce potential 

costs or increase potential benefits 

while preserving the effective and 

efficient administration of the 

Department’s programs and activities. 

During and after the comment period, 

you may inspect all public comments 

about the proposed regulations by 

accessing Regulations.gov. You may also 

inspect the comments in person in room 

8055, 1990 K Street NW., Washington, 

DC, between 8:30 a.m. and 4:00 p.m., 

Washington, DC time, Monday through 

Friday of each week except Federal 

holidays. If you want to schedule time 

to inspect comments, please contact one 

of the persons listed under FOR FURTHER

INFORMATION CONTACT. 

Assistance to Individuals with 

Disabilities in Reviewing the 

Rulemaking Record: On request, we will 

provide an appropriate accommodation 

or auxiliary aid to an individual with a 

disability who needs assistance to 

review the comments or other 

documents in the public rulemaking 

record for the proposed regulations. If 

you want to schedule an appointment 

for this type of accommodation or 

auxiliary aid, please contact one of the 

persons listed under FOR FURTHER

INFORMATION CONTACT. 

Background 

Section 428B(a)(1)(A) of the HEA 

provides that to be eligible to receive a 

Federal PLUS Loan under the Federal 

Family Education Loan (FFEL) Program, 

the applicant must not have an adverse 

credit history, as determined pursuant 

to regulations promulgated by the 

Secretary. This same eligibility 

requirement applies to applicants for 

PLUS loans under the Direct Loan 

Program. See section 455(a)(1) of the 

HEA. The definition of ‘‘adverse credit 

history’’ in the current Direct Loan 

Program regulations is effectively the 

same as the regulatory definition of 

‘‘adverse credit history’’ in the FFEL 

Program. The Department conducts a 

credit check on each applicant for a 

PLUS loan under the Direct Loan 

Program to determine whether he or she 

has an adverse credit history. 

Section 685.200(b) and (c) of the 

Direct Loan Program regulations 

specifies that graduate and professional 

students, and parents borrowing on 

behalf of their dependent children, may 

borrow PLUS loans if they meet 

applicable eligibility requirements and 

do not have an adverse credit history. 

The regulations that specify what is 

considered to be an adverse credit 

history have not been updated since the 

Direct Loan Program was established in 

1994. 

In 2010, Congress amended the HEA 

to end the making of new loans under 

the FFEL Program effective July 1, 2010. 

Since that date, all new subsidized and 

unsubsidized Stafford Loans, PLUS 

Loans, and Consolidation Loans have 

been originated in the Direct Loan 

Program. In implementing this change, 

the Department found that the 

operational criteria being used in the 

Direct Loan Program to determine 

whether an applicant for a PLUS loan 

has an adverse credit history were not 

consistent with the definition of 

‘‘adverse credit history’’ in the Direct 

Loan Program regulations or with the 

regulations for the FFEL Program. 

Specifically, the Department determined 

that PLUS loan applicants who had 

debts that were in collection or charged 

off were passing the adverse credit 

history check even though these 

applicants were 90 or more days 

delinquent on a debt, which constitutes 

an adverse credit history under the 

Department’s regulations. Once the 

inconsistency was identified, the 

Department modified its procedures in 

November 2011 so that borrowers with 

debts in collection or which were 

charged off would be considered to have 

an adverse credit history. This change 

increased the number of parent and 

graduate and professional student PLUS 

loan applicants who were determined to 

have an adverse credit history and thus, 

were originally ineligible for a PLUS 

loan. As a result of the increased initial 

denial rate, the Department determined 

that it would be appropriate to review 

the adverse credit history standards that 

were originally established in 1994. To 

reflect programmatic and economic 

changes that have occurred since 1994, 

the Department proposes to amend 

§ 685.200(b) and (c) to update the 

regulatory requirements governing 

PLUS loan adverse credit history 

determinations. 

Public Participation 

On April 16, 2013, we published a 

document in the Federal Register (78 

FR 22467) announcing topics for 

consideration for action by a negotiated 

rulemaking committee. A correction to 

this document was published in the 

Federal Register on April 30, 2013 (78 

FR 25235). The topics for consideration 

listed in these documents were: Cash 

management of funds provided under 

the title IV Federal Student Aid 

programs; State authorization for 

programs offered through distance 

education or correspondence education; 

State authorization for foreign locations 

of institutions located in a State; clock 

to credit hour conversion; gainful 

employment; changes to the campus 

safety and security reporting 

requirements in the Jeanne Clery 

Disclosure of Campus Security Policy 

and Campus Crime Statistics Act made 

by the Violence Against Women 

Reauthorization Act of 2013; and the 

definition of ‘‘adverse credit history’’ for 

borrowers in the Federal Direct PLUS 

Loan Program. In the April 16, 2013, 

document, we announced three public 

hearings at which interested parties 

could comment on the negotiated 

rulemaking topics suggested by the 

Department and could suggest 

additional topics for consideration for 

action by a negotiated rulemaking 

committee. On May 13, 2013, we 

published in the Federal Register (78 

FR 27880) a document announcing the 

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46642 Federal Register / Vol. 79, No. 153 / Friday, August 8, 2014 / Proposed Rules 

addition of a fourth hearing. The 

hearings were held on— 

May 21, 2013, in Washington, DC; 

May 23, 2013, in Minneapolis, 

Minnesota; 

May 30, 2013, in San Francisco, 

California; and 

June 4, 2013, in Atlanta, Georgia. 

We also invited parties unable to 

attend a public hearing to submit 

written comments on the additional 

topics and to submit other topics for 

consideration. Transcripts from the 

public hearings are available at http://

www2.ed.gov/policy/highered/reg/

hearulemaking/2012/index.html. 

Written comments submitted in 

response to the April 16, 2013, Federal 

Register document may be viewed 

through the Federal eRulemaking Portal 

at www.regulations.gov, within docket 

ID ED–2012–OPE–0008. You can link to 

the ED–2012–OPE–0008 docket as a 

related docket inside the ED–2014– 

OPE–0082 docket associated with this 

notice of proposed rulemaking. 

Alternatively, individuals can enter the 

docket ID ED–2012–OPE–0008 in the 

search box to locate the appropriate 

docket. Instructions for finding 

comments are also available on the site 

under ‘‘How to Use Regulations.gov’’ in 

the Help section. 

Negotiated Rulemaking 

Section 492 of the HEA requires the 

Secretary to obtain public involvement 

in the development of proposed 

regulations affecting programs 

authorized by title IV of the HEA. After 

obtaining extensive input and 

recommendations from the public, 

including individuals and 

representatives of groups involved in 

the title IV, HEA programs, the 

Secretary must subject the proposed 

regulations to a negotiated rulemaking 

process. If negotiators reach consensus 

on the proposed regulations, the 

Department agrees to publish without 

alteration a defined group of regulations 

on which the negotiators reached 

consensus unless the Secretary reopens 

the process or provides a written 

explanation to the participants stating 

why the Secretary has decided to depart 

from the agreement reached during 

negotiations. Further information on the 

negotiated rulemaking process can be 

found at: http://www2.ed.gov/policy/

highered/reg/hearulemaking/hea08/negreg-faq.html. 

On November 20, 2013, the 

Department published a document in 

the Federal Register (78 FR 69612) 

announcing its intention to establish a 

negotiated rulemaking committee to 

prepare proposed regulations to address 

program integrity and improvement 

issues for the Federal Student Aid 

programs authorized under title IV of 

the HEA. The document set forth a 

schedule for the committee meetings 

and requested nominations for 

individual negotiators to serve on the 

negotiating committee. 

The Department sought negotiators to 

represent the following groups: 

Students; legal assistance organizations 

that represent students; consumer 

advocacy organizations; State higher 

education executive officers; State 

Attorneys General and other appropriate 

State officials; business and industry; 

institutions of higher education eligible 

to receive Federal assistance under title 

III, parts A, B, and F and title V of the 

HEA, which include Historically Black 

Colleges and Universities, HispanicServing Institutions, American Indian 

Tribally Controlled Colleges and 

Universities, Alaska Native and Native 

Hawaiian-Serving Institutions, 

Predominantly Black Institutions, and 

other institutions with a substantial 

enrollment of needy students as defined 

in title III of the HEA; two-year public 

institutions of higher education; fouryear public institutions of higher 

education; private, non-profit 

institutions of higher education; private, 

for-profit institutions of higher 

education; regional accrediting agencies; 

national accrediting agencies; 

specialized accrediting agencies; 

financial aid administrators at 

postsecondary institutions; business 

officers and bursars at postsecondary 

institutions; admissions officers at 

postsecondary institutions; institutional 

third-party servicers who perform 

functions related to the title IV Federal 

Student Aid programs (including 

collection agencies); State approval 

agencies; and lenders, community 

banks, and credit unions. The 

Department considered the nominations 

submitted by the public and chose 

negotiators who would represent the 

various constituencies. 

The negotiating committee included 

the following members: 

Chris Lindstrom, U.S. Public Interest 

Research Group, and Maxwell John 

Love (alternate), United States Student 

Association, representing students. 

Whitney Barkley, Mississippi Center 

for Justice, and Toby Merrill (alternate), 

Project on Predatory Student Lending, 

The Legal Services Center, Harvard Law 

School, representing legal assistance 

organizations that represent students. 

Suzanne Martindale, Consumers 

Union, representing consumer advocacy 

organizations. 

Carolyn Fast, Consumer Frauds and 

Protection Bureau, New York Attorney 

General’s Office, and Jenny Wojewoda 

(alternate), Massachusetts Attorney 

General’s Office, representing State 

attorneys general and other appropriate 

State officials. 

David Sheridan, School of 

International & Public Affairs, Columbia 

University in the City of New York, and 

Paula Luff (alternate), DePaul 

University, representing financial aid 

administrators. 

Gloria Kobus, Youngstown State 

University, and Joan Piscitello 

(alternate), Iowa State University, 

representing business officers and 

bursars at postsecondary institutions. 

David Swinton, Benedict College, and 

George French (alternate), Miles College, 

representing minority serving 

institutions. 

Brad Hardison, Santa Barbara City 

College, and Melissa Gregory (alternate), 

Montgomery College, representing twoyear public institutions. 

Chuck Knepfle, Clemson University, 

and J. Goodlett McDaniel (alternate), 

George Mason University, representing 

four-year public institutions. 

Elizabeth Hicks, Massachusetts 

Institute of Technology, and Joe Weglarz 

(alternate), Marist College, representing 

private, non-profit institutions. 

Deborah Bushway, Capella 

University, and Valerie Mendelsohn 

(alternate), American Career College, 

representing private, for-profit 

institutions. 

Casey McGuane, Higher One, and Bill 

Norwood (alternate), Heartland Payment 

Systems, representing institutional 

third-party servicers. 

Russ Poulin, WICHE Cooperative for 

Educational Technologies, and Marshall 

Hill (alternate), National Council for 

State Authorization Reciprocity 

Agreements, representing distance 

education providers. 

Dan Toughey, TouchNet, and Michael 

Gradisher (alternate), Pearson Embanet, 

representing business and industry. 

Paul Kundert, University of 

Wisconsin Credit Union, and Tom 

Levandowski (alternate), Wells Fargo 

Bank Law Department, Consumer 

Lending & Corporate Regulatory 

Division, representing lenders, 

community banks, and credit unions. 

Leah Matthews, Distance Education 

and Training Council, and Elizabeth 

Sibolski (alternate), Middle States 

Commission on Higher Education, 

representing accrediting agencies. 

Carney McCullough, U.S. Department 

of Education, representing the 

Department. 

Pamela Moran, U.S. Department of 

Education, representing the Department. 

The negotiated rulemaking committee 

met to develop proposed regulations on 

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Federal Register / Vol. 79, No. 153 / Friday, August 8, 2014 / Proposed Rules 46643 

1All of the charts provided to the negotiators are 

available at: http://www2.ed.gov/policy/highered/

reg/hearulemaking/2012/programintegrity.html#2. 

2This data is available at: http://www2.ed.gov/

policy/highered/reg/hearulemaking/2012/

programintegrity.html#2. 

3These charts are available at: http://

www2.ed.gov/policy/highered/reg/hearulemaking/

2012/programintegrity.html#3. 

February 19–21, 2014, March 26–28, 

2014, and April 23–25, 2014. In 

response to requests from members of 

the negotiating committee, the 

Department provided extensive PLUS 

loan data to the committee prior to the 

March session. During the March 

session, the Department proposed 

adding an additional negotiated 

rulemaking session to the schedule to 

give the negotiators sufficient time to 

consider the PLUS loan data. The 

negotiators agreed to add a fourth and 

final session held on May 19–20, 2014. 

At its first meeting, the negotiating 

committee reached agreement on its 

protocols and proposed agenda. These 

protocols provided, among other things, 

that the committee would operate by 

consensus. Consensus means that there 

must be no dissent by any member in 

order for the committee to have reached 

agreement. Under the protocols, if the 

committee reached a final consensus on 

all issues, the Department would use the 

consensus-based language in its 

proposed regulations. Furthermore, the 

Department would not alter the 

consensus-based language of its 

proposed regulations unless the 

Department reopened the negotiated 

rulemaking process or provided a 

written explanation to the committee 

members regarding why it decided to 

depart from that language. 

During the first meeting, the 

negotiating committee agreed to 

negotiate an agenda of six issues related 

to student financial aid. These six issues 

were: Clock to credit hour conversion; 

State authorization of distance 

education; State authorization of foreign 

locations of domestic institutions; cash 

management; retaking coursework; and 

PLUS loan adverse credit history. Under 

the protocols, a final consensus would 

have to include consensus on all six 

issues. 

During the meeting, the Department 

explained that it planned to include the 

proposed regulations that would be 

published after completion of the 

negotiated rulemaking process in two 

separate NPRMs. One NPRM would 

contain the proposed PLUS loan adverse 

credit history regulations. The second 

NPRM would contain all the remaining 

proposed regulations on the negotiating 

agenda. This is consistent with past 

practice for publishing NPRMs, as the 

Department generally publishes 

proposed loan program regulatory 

changes separately from proposed 

regulations for the Student Assistance 

General Provisions regulations in 34 

CFR Part 668 or other title IV, HEA 

program regulations when there are no 

shared cross-programmatic or other 

conforming changes involved. 

Non-Federal negotiators encouraged 

the Department to take action quickly 

with respect to the PLUS loan adverse 

credit history regulations. The 

Department said it would consider 

designating final regulations resulting 

from this NPRM for early 

implementation under section 484(c)(2) 

of the HEA. 

During committee meetings, the 

committee reviewed and discussed the 

Department’s drafts of regulatory 

language and the committee members’ 

alternative language and suggestions. At 

the final meeting on May 20, 2014, the 

committee did not reach consensus on 

the Department’s proposed regulations. 

For this reason, and according to the 

committee’s protocols, all parties who 

participated or were represented in the 

negotiated rulemaking, in addition to all 

members of the public, may comment 

freely on the proposed regulations. For 

more information on the negotiated 

rulemaking sessions, please visit: 

http://www2.ed.gov/policy/highered/

reg/hearulemaking/2012/

programintegrity.html#info. 

Summary of Relevant Data 

PLUS Loan Data 

At the first negotiating session, the 

non-Federal negotiators asked the 

Department to provide certain data 

about the PLUS loan program to the 

negotiating committee. The non-Federal 

negotiators asked if the Department 

could calculate PLUS loan cohort 

default rates. They also asked for 

information on PLUS loan volume— 

both numbers of borrowers and amounts 

borrowed. Non-Federal negotiators 

asked to see rates of PLUS loan denials 

due to an adverse credit history, broken 

out by school sector. In addition, they 

asked for data on the frequency of 

different adverse credit conditions that 

result in denial of a PLUS loan. 

The Department agreed to provide 

PLUS loan data for the PLUS loan 

adverse credit history discussion at the 

second negotiated rulemaking session. 

The Session 2 Data 

Prior to the second negotiated 

rulemaking session, the Department 

provided the non-Federal negotiators 

with charts containing the following 

data: 

• Debt of PLUS, Parent PLUS, and 

Grad PLUS Borrowers; 

• PLUS Credit Check Denial and 

Remediation Rates by Sector and by 

Program Offering; 

• Credit Check Declination Rate by 

Sector by Year; 

• Top Five Credit Check Declination 

Reasons by Sector by Year; 

• PLUS Borrower 3-Year Cohort 

Default Rate; and 

• AY 2012–13 Credit Check Approval 

and Denials.1

In addition, during the second 

session, the Department provided the 

negotiators with data breaking out PLUS 

loan disbursements under the Direct 

Loan and FFEL programs from 2006 to 

2010.2

The non-Federal negotiators 

expressed appreciation to the 

Department for providing the requested 

data about PLUS loans. The non-Federal 

negotiators also asked for additional 

data in connection with the charts 

showing PLUS loan remediation rates 

(the rates at which applicants who were 

initially denied PLUS loans due to an 

adverse credit history were able to 

obtain PLUS loans; or, if the parent did 

not obtain PLUS loans, the rates at 

which the parent’s dependent children 

were able to receive additional 

unsubsidized loans) and PLUS loan 

cohort default rates. The Department 

agreed to provide this additional data 

for the third negotiated rulemaking 

session. 

The Session 3 Data 

Prior to the third negotiated 

rulemaking session, in response to the 

requests made during the second 

session, the Department provided the 

non-Federal negotiators with amended 

versions of the following charts: 

• PLUS Credit Check Denial 

Remediation Rates by Sector and by 

Program Offering (two versions 

reflecting breakout of remediation by 

obtaining an endorser, submitting 

documentation of extenuating 

circumstances, or the dependent 

student’s receipt of additional 

unsubsidized loans); and 

• PLUS Borrower Three-Year Cohort 

Default Rates (broken out by the FFEL 

and Direct Loan programs).3

Summary of Proposed Changes 

The proposed regulations would— 

• Revise the student PLUS loan 

borrower eligibility criteria to state more 

clearly that the PLUS loan adverse 

credit history requirements apply to 

graduate or professional student PLUS 

loan borrowers. 

• Add definitions of the terms 

‘‘charged off’’ and ‘‘in collection’’ for 

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46644 Federal Register / Vol. 79, No. 153 / Friday, August 8, 2014 / Proposed Rules 

purposes of determining whether an 

applicant for a PLUS loan has an 

adverse credit history. 

• Specify that a PLUS loan applicant 

has an adverse credit history if the 

applicant has one or more debts with a 

total combined outstanding balance 

greater than $2,085 that are 90 or more 

days delinquent as of the date of the 

credit report, or that have been placed 

in collection or charged off during the 

two years preceding the date of the 

credit report. 

• Provide that the combined 

outstanding balance threshold of $2,085 

may be adjusted over time on a basis 

determined by the Secretary. 

• Revise the provision that specifies 

the types of documentation the 

Secretary may accept as a basis for 

determining that extenuating 

circumstance exist for a PLUS loan 

applicant who is determined to have an 

adverse credit history. 

• Specify that an applicant for a 

PLUS loan who is determined to have 

an adverse credit history but who 

documents to the Secretary’s 

satisfaction that extenuating 

circumstances exist must complete 

PLUS loan counseling offered by the 

Secretary before receiving the loan. 

Significant Proposed Regulations 

We discuss substantive issues under 

the sections of the proposed regulations 

to which they pertain. Generally, we do 

not address proposed regulatory 

provisions that are technical or 

otherwise minor in effect. 

Student PLUS Borrower (34 CFR 

685.200(b)) 

Statute: Section 428B(a)(1)(A) of the 

HEA specifies that a graduate or 

professional student with an adverse 

credit history is not eligible to borrow 

a PLUS loan. 

Current Regulations: Current 

§ 685.200(b)(5) specifies that a student 

must meet the requirements of 

§ 685.200(c)(1)(vii) to qualify for a PLUS 

loan. Current § 685.200(c)(1)(vii) 

includes the adverse credit history 

requirements for parent PLUS loan 

borrowers. 

Proposed Regulations: Proposed 

§ 685.200(b)(5) specifies that a graduate 

or professional student must meet the 

requirements ‘‘that apply to a parent’’ 

under § 685.200(c)(2)(viii)(A) through 

(c)(2)(viii)(D) to qualify for a PLUS loan. 

Proposed § 685.200(c)(2)(viii)(A) 

through (c)(2)(viii)(D) would include the 

adverse credit history requirements for 

parent PLUS borrowers. 

Reasons: The proposed regulations 

would revise § 685.200(c). Due to the 

revision to § 685.200(c), we would also 

need to revise the cross-reference in 

§ 685.200(b)(5). New 

§ 685.200(c)(1)(viii)(B) refers to a parent 

with an adverse credit history, rather 

than an applicant with an adverse credit 

history. Therefore, a conforming change, 

adding a reference to the ‘‘parent’’, 

would be required in § 685.200(b)(5). In 

addition, proposed § 685.200(b)(5) 

would clarify that the adverse credit 

history requirements that apply to 

parent PLUS borrowers under 

§ 685.200(c)(2)(viii)(A) through 

(c)(2)(viii)(D) also apply to all student 

PLUS borrowers. 

Some of the non-Federal negotiators 

contended that there should be different 

eligibility standards for parent PLUS 

loan borrowers and graduate and 

professional student PLUS loans 

borrowers. These negotiators argued that 

graduate and professional students 

should be eligible for PLUS loans 

without application of the adverse 

credit history criteria. Alternatively, one 

non-Federal negotiator requested that 

the Department consider defining 

‘‘adverse credit history’’ differently for 

graduate and professional student PLUS 

loan borrowers than for parent PLUS 

loan borrowers. 

We did not agree with the suggestion 

to have different standards for parent 

and student PLUS loan applicants. We 

noted that, pursuant to the HEA, there 

is a single PLUS loan program that 

provides loans for both graduate and 

professional students and parents of 

dependent students. The statutory 

requirement that a PLUS loan applicant 

not have an adverse credit history 

applies equally to student and parent 

applicants. We see no basis under the 

HEA for establishing different regulatory 

definitions of ‘‘adverse credit history’’ 

for graduate and professional student 

applicants and parent PLUS applicants. 

Parent PLUS Borrower: Definitions (34 

CFR 685.200(c)(1)) 

Statute: None. 

Current Regulations: None. 

Proposed Regulations: The proposed 

regulations would define the terms 

‘‘charged off’’ and ‘‘in collection’’ for 

purposes of adverse credit history 

determinations. Proposed 

§ 685.200(c)(1)(i) would define the term 

‘‘charged off’’ to mean a debt that a 

creditor has written off as a loss, but 

that is still subject to collection action. 

Proposed § 685.200(c)(1)(ii) would 

define the term ‘‘in collection’’ to mean 

a debt that has been placed with a 

collection agency by a creditor, or that 

is subject to more intensive efforts by a 

creditor to recover amounts owed from 

a borrower who has not responded 

satisfactorily to the demands routinely 

made as part of the creditor’s billing 

procedures. 

Reasons: Under the current 

regulations, an applicant who has debts 

that are in collection or that has been 

charged off will be determined to have 

an adverse credit history, but the 

regulations do not define these terms. 

The proposed definitions for these terms 

are commonly understood definitions in 

the collections industry. Although some 

of the non-Federal negotiators did not 

agree that these conditions should 

constitute adverse credit, they agreed 

that if the Department is going to 

consider debts that are in collection or 

that have been charged off as indicators 

that a borrower has an adverse credit 

history, the terms should be defined in 

the regulations. 

Parent PLUS Borrower: Adverse Credit 

History (34 CFR 685.200(c)(2)) 

Statute: Section 428B(a)(1)(A) of the 

HEA provides that a parent of a 

dependent student is not eligible to 

borrow a PLUS loan if the parent has an 

adverse credit history. 

Current Regulations: Current 

regulations under § 685.200(c)(1)(vii)(B) 

establish the conditions under which a 

PLUS loan applicant will be considered 

to have an adverse credit history. Under 

§ 685.200(c)(1)(vii)(B), an adverse credit 

history means that, as of the date of the 

credit report, the applicant: (1) Is 90 or 

more days delinquent on any debt; or (2) 

has been the subject of a default 

determination, bankruptcy discharge, 

foreclosure, repossession, tax lien, wage 

garnishment, or write-off of a debt under 

title IV of the HEA during the five years 

preceding the date of the credit report. 

Proposed Regulations: Under 

proposed § 685.200(c)(2)(viii)(B)(1), an 

adverse credit history would mean that 

a parent (or, by cross-reference, a 

student) has one or more debts with a 

total combined outstanding balance 

greater than $2,085, that are 90 or more 

days delinquent as of the date of the 

credit report, or that have been charged 

off or placed in collection during the 

two years preceding the date of the 

credit report. Proposed 

§ 685.200(c)(2)(viii)(B)(1) would provide 

that the $2,085 threshold amount may 

be adjusted over time on a basis 

determined by the Secretary. In 

proposed § 685.200(c)(2)(viii)(B)(2) the 

Department would retain the current 

provision that provides that a parent or 

student has an adverse credit history if 

the parent or student has been the 

subject of a default determination, 

bankruptcy discharge, foreclosure, 

repossession, tax lien, wage 

garnishment, or write-off of a debt under 

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title IV of the HEA during the five years 

preceding the date of the credit report. 

Reasons: After the Department 

corrected its implementation of the 

adverse credit history standards in 

November 2011, some borrowers who 

had qualified for PLUS loans in earlier 

years were determined to have an 

adverse credit history when they 

applied for subsequent PLUS loans even 

though their credit history had not 

substantially changed. In many cases, 

these applicants requested 

reconsideration on the basis of 

extenuating circumstances as permitted 

under the regulations. 

Based on its experience in handling 

PLUS loan applicant requests for 

reconsideration on the basis of 

extenuating circumstances, the 

Department concluded that it was 

appropriate to update the standards for 

determining that an applicant has an 

adverse credit history to reflect 

programmatic and economic changes 

since the standards were established in 

1994. 

We believe that the proposed changes 

to the PLUS loan adverse credit history 

regulations will improve the adverse 

credit history determination process by 

incorporating some of the circumstances 

that the Department considers during 

the reconsideration process into the 

standards for initial determinations of 

an adverse credit history. We expect 

that making these changes to the 

definition of ‘‘adverse credit history’’ 

will reduce the number of applicants 

who, under the current regulations, are 

initially denied PLUS loans due to an 

adverse credit history, but upon further 

review, the Department determines have 

extenuating circumstances. During the 

negotiated rulemaking sessions, the 

committee members discussed how the 

proposed changes would serve three 

public interests: (1) Ensuring greater 

access to higher education for all 

students and families; (2) ensuring that 

borrowers do not take out loans that 

they will be unable to repay without 

hardship; and (3) protecting the Federal 

fiscal interest by ensuring that 

borrowers repay their student loans. 

Some of the non-Federal negotiators 

expressed the view that the primary 

focus of the title IV, HEA programs, 

including the PLUS loan program, 

should be increasing access to higher 

education. These negotiators argued that 

the lending standards that apply to 

commercial loans should not be applied 

to PLUS loans, which serve a 

compelling public interest. The 

negotiators expressed the view that it is 

a parent’s (or graduate or professional 

student’s) decision as to whether to 

borrow a PLUS loan, and in what 

amount, even if the applicant’s financial 

circumstances or history may indicate 

that the applicant could experience 

difficulty in paying it back. One nonFederal negotiator strongly 

recommended that the Department 

return to the adverse credit history 

standard as it had been implemented in 

the Direct Loan program prior to the 

changes made in November 2011, under 

which debts in collection or that were 

charged off did not constitute adverse 

credit. 

Other non-Federal negotiators argued 

that the Department should take action 

to prevent overborrowing by parents 

and students. These negotiators argued 

that a return to the standard in the 

Direct Loan program used prior to 

November 2011 would encourage both 

student and parent borrowers to take out 

greater, perhaps unaffordable, amounts 

of PLUS loan debt regardless of the 

financial circumstances or history of the 

applicant. They also argued that, in 

addition to ensuring access to higher 

education, the Department should 

consider whether or not borrowers 

could repay these loans. 

In expressing their concerns about 

overborrowing and the potential for 

high debt loads, some non-Federal 

negotiators noted that, unlike Direct 

Subsidized and Direct Unsubsidized 

loans, there are no annual or aggregate 

loan limits for PLUS loans and a PLUS 

loan can be taken out in an amount up 

to the student’s cost of attendance. They 

further noted that parent PLUS loan 

borrowers are not eligible for incomedriven repayment plans and it is very 

difficult to qualify for a bankruptcy 

discharge of a student or parent loan. To 

that end, some non-Federal negotiators 

recommended establishing annual and 

aggregate loan limits for PLUS loan 

borrowers. We noted that loan limits in 

the title IV, HEA programs, including 

the PLUS loan program, are based on 

the relevant statute, and may not be 

established through regulation. 

Some non-Federal negotiators 

recommended considering the 

applicant’s ability to repay in an adverse 

credit history determination in order to 

prevent overborrowing of PLUS loans. 

We noted that the HEA would need to 

be amended to allow consideration of 

the applicant’s ability to repay. Rather, 

adverse credit history is a measure of an 

individual’s history of repaying existing 

debt. It does not measure whether the 

individual has the financial ability to 

repay a specific level of debt, but 

whether that individual has repaid debt 

in the past. 

In developing the proposed 

regulations, we attempted to strike a 

balance between the public policy 

interests of ensuring access to higher 

education while helping to ensure that 

borrowers do not take out loans that 

their past financial credit history 

indicates they will not repay. Based on 

our experience in evaluating requests 

for reconsideration based on 

extenuating circumstances, we expect 

that more borrowers would qualify for 

PLUS loans under the adverse credit 

history standard in the proposed 

regulations without the need to 

demonstrate extenuating circumstances. 

The proposed definition of ‘‘adverse 

credit history’’ has several components. 

Each component is discussed separately 

in the following sections. 

Component 1—Outstanding Balance 

Greater than $2,085 

Statute: None. 

Current Regulations: Current 

§ 685.200(c)(1)(vii)(D) specifies that, for 

purposes of documenting extenuating 

circumstances, the Secretary may rely 

on a satisfactory statement from the 

applicant explaining any delinquency 

with an outstanding balance greater 

than $500. 

Proposed Regulations: Under the 

proposed regulations, the amount of the 

applicant’s debt would be taken into 

account during the initial determination 

of whether the applicant has an adverse 

credit history, rather than as part of the 

process for documenting extenuating 

circumstances following denial of a 

PLUS loan. In addition, the proposed 

regulations would establish a standard 

that an applicant is not considered to 

have an adverse credit history unless 

the applicant’s debts have a total 

combined outstanding balance greater 

than $2,085. 

Reasons: After the November 2011 

operational change to the Department’s 

implementation of the adverse credit 

history definition, the Department 

adjusted the $500 amount, referred to as 

‘‘the threshold amount,’’ to $780 to 

account for inflation since 1994. Later, 

the Department increased the threshold 

amount from $780 to $2,085. The 

Department selected this level to reflect 

the estimated median debt level for all 

debts with a status of in collection, 

charged off, or 90 or more days 

delinquent, from all parent PLUS loan 

denials resulting from all credit checks 

conducted between the spring of 2012 

and the spring of 2013. The Department 

now proposes to use the $2,085 

threshold amount in the initial 

determination of whether an applicant 

has an adverse credit history to reflect 

current operational practice in our 

reconsideration process. 

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Component 2—Adjustment Over Time 

Statute: None. 

Current Regulations: None. 

Proposed Regulations: Under the 

proposed regulations, the $2,085 

amount may be adjusted over time on a 

basis determined by the Secretary. 

Reasons: Several of the non-Federal 

negotiators recommended that the 

Department index the $2,085 amount to 

the rate of inflation. The negotiators 

argued that by indexing the amount to 

an accepted measure of inflation, 

increases could be calculated and 

implemented without the necessity of 

amending the regulations. 

Most of these negotiators 

recommended indexing the $2,085 

amount to the Consumer Price Index 

(CPI), a measure of inflation determined 

by the Bureau of Labor Statistics (BLS). 

However, BLS calculates several 

different CPI rates on a monthly basis. 

The CPI rate most commonly used as a 

measure of inflation is the Consumer 

Price Index for All Urban Consumers 

(CPI–U). The Department considered 

using the CPI–U as the basis for 

indexing, but decided to invite 

comment on which index would be 

most appropriate in this context, and 

whether to base the adjustment of the 

$2,085 amount on a measure other than 

inflation. 

One non-Federal negotiator suggested 

that the Department should adjust the 

amount of debt annually. This 

negotiator argued that, while small, 

short-term changes would have little 

impact in one year, over a period of time 

they could have a significant impact. 

Another non-Federal negotiator 

suggested using the CPI, but averaging 

the rate over time. This negotiator noted 

that averaging the rate over time would 

smooth out abrupt and relatively shortterm changes in CPI and thus reduce 

volatility. 

The Department is open to adjusting 

the $2,085 amount. Therefore, we are 

proposing in the regulations that the 

Secretary may adjust the amount over 

time, on a basis determined by the 

Secretary. Any adjustments that the 

Secretary makes to the $2,085 amount 

would be announced through a Notice 

in the Federal Register. We invite 

comment on this provision, and 

welcome recommendations on an 

appropriate measure of inflation to use 

in adjusting this amount, or whether 

another measure of growth or decline in 

consumer debt due to economic 

conditions may be a more appropriate 

measure. 

As discussed in the ‘‘Operational 

Issues’’ section of this preamble, the 

Department intends to collect, and 

where appropriate publish, information 

about the performance of parent and 

graduate/professional student PLUS 

loans, including default rate information 

based on credit history characteristics of 

Plus loan applicants and individual 

institutional default rates. 

Component 3—Debts 90 or More Days 

Delinquent 

Statute: None. 

Current Regulations: Current 

§ 685.200(c)(1)(vii)(B)(1) specifies that a 

PLUS loan applicant who is 90 or more 

days delinquent on any debt has an 

adverse credit history. 

Proposed Regulations: The proposed 

regulations would maintain the 90 or 

more days delinquent standard. 

Reasons: Some of the non-Federal 

negotiators argued that the current 

delinquency standard of 90 or more 

days past due is too short for adverse 

credit history determinations. These 

negotiators recommended extending the 

past due period to 120 days or 180 days. 

They asserted that credit reports often 

have errors that may not be corrected 

during a 90-day timeframe. 

In the absence of a consistent 

industry-wide standard, we decided to 

maintain the standard of 90 or more 

days delinquent in the proposed 

regulations. We rely on credit reports to 

determine whether an applicant is 

delinquent on a debt, as the number of 

days a debt is past due is included on 

an individual’s credit report until an 

account is placed in collection. Based 

on our experience, most creditors send 

accounts to collection once they are 90 

days’ delinquent. Once an account is 

placed in collection, the number of days 

past due is generally not reflected on the 

credit report. Therefore, a standard 

beyond the current 90-day standard 

would be more difficult to track. 

With regard to errors on credit 

reports, a PLUS loan applicant would 

have the opportunity during the process 

for determining whether extenuating 

circumstances for the adverse credit 

history condition exist to show that the 

determination of an adverse credit 

history was based on an error in the 

credit report by providing an updated 

credit report or information from the 

creditor. 

Component 4—In Collection or Charged 

Off 

Statute: None. 

Current Regulations: None. 

Proposed Regulations: Under the 

proposed regulations, an applicant with 

debts in collection or debts that have 

been charged off during the two years 

preceding the date of the credit report 

would have an adverse credit history. 

Reasons: Under current operational 

practice, a borrower with debts in 

collection or debts that have been 

charged off in the preceding five years 

is considered to have an adverse credit 

history. One non-Federal negotiator 

recommended that the Department 

return to the operational standard used 

prior to November 2011, when the 

Department did not consider these 

circumstances to constitute an adverse 

credit history. 

We do not agree that the earlier 

operational practice met the purposes of 

the statute in determining an adverse 

credit history. We believe it would 

create an inconsistency in the 

regulations to not consider as an adverse 

credit history accounts in collection or 

debts that have been charged off, while 

including accounts that are 90 or more 

days delinquent. Generally, accounts in 

collection or accounts that have been 

charged off are well past the 90-day 

delinquency stage. 

Although we do not propose to 

change the treatment of collection 

accounts and charged-off accounts in 

the determination of an adverse credit 

history, we did agree to propose to 

reduce the period of time for which 

such accounts would be considered as 

an adverse credit history. The proposed 

regulations would reduce the current 

look-back period of five years to two 

years preceding the date of the credit 

report. We believe that this standard 

would screen out most anomalous 

conditions, such as a single bad debt on 

an otherwise clean credit report. 

Non-Federal negotiators made varying 

proposals for the look-back period for 

debts that are in collection or charged 

off. Some negotiators recommended a 

one-year look-back period. We do not 

believe, however, that one year is 

sufficient, particularly when the past 

due status of the account might be 

reduced through a series of payments, 

but not eliminated, and then increase 

again. 

Other non-Federal negotiators 

recommended a three-year look-back 

period. They argued that, in many 

States, debts have a statute of 

limitations of three years. However, 

because the statute of limitations on 

debts varies from State to State, we do 

not think that it is a useful standard in 

determining the length of the look-back 

period for collections and charge-offs in 

the PLUS loan program. 

Based on these considerations, we 

believe that the proposed two-year lookback period for debts that are in 

collection or have been charged off is 

appropriate. A one-year look-back 

period is too short to measure a PLUS 

loan applicant’s history and a five-year 

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period is more closely associated with 

the major, long-term items indicating an 

adverse credit history in proposed 

§ 685.200(c)(2)(viii)(B)(2). 

Extenuating Circumstances (34 CFR 

685.200(c)(2)) 

Statute: None. 

Current Regulations: Section 

685.200(c)(1)(vii)(A)(3) specifies that a 

parent who has an adverse credit 

history, but who documents to the 

satisfaction of the Secretary that 

extenuating circumstances exist, may be 

eligible for a PLUS loan. Section 

685.200(c)(1)(vii)(D) of the current 

regulations (as amended by final 

regulations published on November 1, 

2013) provides that the Secretary may 

determine that extenuating 

circumstances exist based on 

documentation that includes, but is not 

limited to, an updated credit report, a 

statement from the creditor that the 

borrower has made satisfactory 

arrangements to repay the debt, or a 

satisfactory statement from a borrower 

explaining any delinquencies with an 

outstanding balance of less than $500. 

Proposed Regulations: Proposed 

§ 685.200(c)(2)(viii)(A)(3) states that, in 

addition to providing documentation to 

the Secretary demonstrating that 

extenuating circumstances exist, a 

parent or student with an adverse credit 

history would be required to complete 

PLUS loan counseling offered by the 

Secretary to become eligible for a PLUS 

loan. 

Proposed § 685.200(c)(2)(viii)(D)(2) 

would eliminate from the list of possible 

extenuating circumstances a statement 

from an applicant explaining any 

delinquencies with an outstanding 

balance of less than $500. 

Reasons: During the negotiations 

there was a significant amount of 

discussion about methods for improving 

financial literacy for PLUS loan 

applicants. Many non-Federal 

negotiators recommended that all parent 

PLUS loan applicants be required to 

complete loan counseling before 

receiving a PLUS loan, much as firsttime student borrowers are required to 

complete entrance counseling before 

receiving Direct Subsidized Loans, 

Direct Unsubsidized Loans, or student 

Direct PLUS loans. The Department 

explained, however, that, while loan 

counseling is a statutory requirement for 

student borrowers, the HEA does not 

require parent PLUS applicants to 

receive loan counseling prior to 

receiving a PLUS loan. Therefore, the 

Department does not have the legal 

authority to extend this requirement to 

all PLUS loan applicants. 

However, the Department is 

proposing through these regulations that 

a PLUS loan applicant who is ineligible 

for a PLUS loan due to an adverse credit 

history, but who documents to the 

satisfaction of the Secretary that 

extenuating circumstances exist, would 

be required to complete loan counseling 

as an additional condition for receiving 

the PLUS loan. The Department also 

plans to offer enhanced PLUS loan 

consumer information, as discussed 

under ‘‘Operational Issues.’’ 

The proposed regulations do not 

apply the loan counseling requirement 

to a PLUS loan applicant who has an 

adverse credit history but is eligible to 

receive a PLUS loan by obtaining an 

endorser who does not have an adverse 

credit history. A PLUS loan applicant 

who obtains an endorser is still 

primarily responsible for repaying the 

PLUS loan. The Department believes 

that these applicants, like PLUS loan 

applicants who qualify due to 

extenuating circumstances, would 

benefit from PLUS loan counseling. 

Therefore, the Secretary is requesting 

comment on whether the loan 

counseling requirement for applicants 

who qualify due to extenuating 

circumstances should also apply to 

applicants who obtain an endorser. 

Operational Issues 

Validity of Credit Checks for 90 Days 

As explained in the ‘‘Background’’ 

section of this preamble, the Department 

conducts a credit check on each 

applicant for a PLUS loan to determine 

whether he or she has an adverse credit 

history. A credit check is conducted 

when a school submits a PLUS loan 

origination record to the Department’s 

Common Origination and Disbursement 

(COD) System, or when an applicant for 

a PLUS loan completes the optional 

Direct PLUS Loan Request for 

Supplemental Information (Direct PLUS 

Loan Request) on the Department’s 

StudentLoans.gov Web site. 

Alternatively, a school may submit a 

credit check request for a PLUS loan 

applicant to the COD System Web site. 

Under the Department’s current 

procedures, an approved credit check 

remains valid for purposes of 

determining an applicant’s eligibility to 

receive a PLUS loan for 90 days from 

the date on which the credit check was 

performed. That is, any action that 

would normally trigger a credit check 

(for example, the submission of a Direct 

PLUS Loan Request or a PLUS loan 

origination record) will not do so if a 

prior credit check on the applicant was 

conducted within the past 90 days. This 

90-day window reflects the 

Department’s long-standing practice in 

the Direct Loan Program and is 

consistent with the standard previously 

used by most FFEL Program lenders 

when conducting credit checks on 

applicants for Federal PLUS Loans. The 

90-day window is not in the Direct Loan 

Program regulations, but it was adopted 

by the Department as a reasonable 

standard for ensuring that a credit check 

is conducted within a timeframe that 

will result in an accurate representation 

of a PLUS loan applicant’s current 

credit history prior to the receipt of 

PLUS loan funds. 

During the negotiations, many of the 

non-Federal negotiators expressed 

concern that the current 90-day period 

is not a long enough period of validity 

for the credit check when disbursing 

PLUS loans. They noted that, in certain 

situations, the requirement that a new 

credit check be conducted (if the most 

recent credit check was more than 90 

days in the past) can mean that a PLUS 

loan applicant who was initially 

approved for a PLUS loan for the 

purpose of a school’s financial aid 

award packaging for the upcoming 

academic year may later be denied the 

loan if an event that triggers another 

credit check occurs more than 90 days 

after the date of the prior credit check, 

and if the subsequent credit check 

determines that the borrower has an 

adverse credit history. For example, if a 

student or parent was approved for a 

PLUS loan for the purpose of a school’s 

financial aid award packaging for the 

upcoming academic year based on the 

results of a credit check that was 

completed when the applicant 

submitted a Direct PLUS Loan Request, 

but the school is not able to submit the 

PLUS loan origination record within 90 

days of the date of that credit check, a 

second credit check will be conducted 

when the loan origination record is 

submitted. 

Similarly, an individual who received 

a PLUS loan based on the results of a 

credit check may later request 

additional loan funds by submitting 

another Direct PLUS Loan Request and 

indicating that he or she wants to 

increase the amount of an existing PLUS 

loan. If the borrower submits the Direct 

PLUS Loan Request more than 90 days 

after the date of the prior credit check, 

another credit check will be conducted. 

In both instances, the subsequent credit 

check may potentially result in a 

determination that the borrower now 

has an adverse credit history (if the 

applicant’s financial circumstances have 

changed since the date of the prior 

credit check), and therefore is ineligible 

for a PLUS loan or for an increased loan 

amount, even though the borrower was 

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previously approved based on the 

results of an earlier credit check. 

Many of the non-Federal negotiators 

stated that applicants who are 

determined to be eligible to receive a 

PLUS loan based on the results of a 

credit check should be able to rely on 

that approval if they later need to 

request an increase in the amount of an 

existing loan. Accordingly, some of 

these negotiators suggested that the 

Department should consider changing 

its procedures so that the results of a 

credit check would remain valid for a 

full year after the date of the credit 

check. Other negotiators proposed that 

the Department go even further and 

make a credit check valid for the 

purpose of a parent’s or student’s 

eligibility to receive PLUS loans for the 

duration of a student’s program of study 

if the borrower was not determined to 

have an adverse credit history. 

After considering the concerns 

expressed by some of the non-Federal 

negotiators, the Department has decided 

to modify its procedures so that a credit 

check that indicates that the applicant 

does not have an adverse credit history 

would remain valid for 180 days. We 

believe that extending the window for 

an even longer period of time would 

result in borrowers receiving PLUS loan 

funds based on credit checks that do not 

reasonably reflect the applicant’s most 

current financial circumstances. 

However, extending the window from 

the current 90 days to 180 days should 

satisfactorily address the concerns 

raised by some of the negotiators. 

Although the Department agreed with 

the non-Federal negotiators that it 

would be appropriate to extend the 

period of time during which an 

approved credit check is valid, the 

Department also reminded the 

negotiators that under current 

procedures it is possible for a school to 

process a borrower’s request for an 

increase in the amount of an existing 

PLUS loan without subjecting the 

borrower to a second credit check. In 

such cases, a school may simply submit 

an upward adjustment to the amount of 

an existing PLUS loan to the COD 

system, without submitting a new PLUS 

loan origination record. The submission 

of an upward adjustment will not trigger 

a new credit check, regardless of the 

date of the most recent credit check for 

the borrower. Also, it is not mandatory 

for borrowers to request an increase in 

the amount of an existing loan by 

submitting a Direct PLUS Loan Request, 

which may trigger a second credit 

check. A school may obtain a borrower’s 

request for a loan amount increase by 

other means. 

Enhancing PLUS Borrower Consumer 

Information 

As discussed under the ‘‘Extenuating 

Circumstances’’ section of this 

preamble, the negotiating committee 

discussed methods for improving access 

to consumer information for PLUS loan 

applicants. In particular, many nonFederal negotiators believed that there is 

currently a lack of sufficient consumer 

information specifically targeted at 

parent PLUS loan applicants. 

The Department agrees with the 

concerns expressed by the negotiators 

and will develop enhanced consumer 

information and resources for parent 

PLUS applicants that could be 

incorporated within the existing PLUS 

loan application process or made 

available to parents through links to 

information on other Department Web 

sites. At a minimum, the Department 

will offer voluntary entrance counseling 

to all parent PLUS applicants which 

would provide clear information on the 

monthly payment that would be 

required for the loan the applicant is 

requesting as well as what the total 

monthly payment would be if the 

applicant borrows the same amount for 

each year of a dependent student’s fouryear or six-year undergraduate program. 

In addition, the Department will expand 

its current online financial tools to 

include a PLUS-specific loan calculator 

that would allow parents to evaluate 

their future ability to repay PLUS loans 

based on their individual economic 

circumstances. 

The Department intends to collect, 

and where appropriate publish, 

information about the performance of 

parent and graduate/professional 

student PLUS loans, including default 

rate information based on credit history 

characteristics of PLUS loan applicants 

and individual institutional default 

rates. Providing more detailed 

information about the PLUS loan 

program will assist the Department in 

evaluating the definition of adverse 

credit history in the future and will 

allow institutions to understand the 

impact of PLUS loan borrowing on 

students and parents in order to help 

them better support their parent and 

student PLUS borrowers. 

We invite suggestions for the specific 

types of enhanced consumer 

information that the Department should 

develop for PLUS applicants, 

particularly parent PLUS applicants 

who may be planning to borrow for 

more than one dependent over multiple 

academic years. We also invite 

comments on what other types of 

information about Parent PLUS loans 

would be helpful for institutions and 

consumers, and we invite suggestions 

on the most effective way for the 

Department to communicate with parent 

PLUS borrowers. 

Executive Orders 12866 and 13563 

Regulatory Impact Analysis 

Introduction 

The Department makes Direct PLUS 

Loans to graduate or professional 

students and to parents of dependent 

undergraduate students to help pay for 

education expenses not covered by 

other financial aid. According to data 

from the Department’s Federal Student 

Aid (FSA) office, approximately 3.9 

million borrowers owe a balance of $100 

billion in total Direct PLUS loans. The 

Department is proposing these 

regulations to update the standard for 

determining if a potential borrower has 

an adverse credit history for purposes of 

eligibility for a Direct PLUS loan. 

Under Executive Order 12866, the 

Secretary must determine whether this 

regulatory action is ‘‘significant’’ and, 

therefore, subject to the requirements of 

the Executive order and subject to 

review by the Office of Management and 

Budget (OMB). Section 3(f) of Executive 

Order 12866 defines a ‘‘significant 

regulatory action’’ as an action likely to 

result in a rule that may— 

(1) Have an annual effect on the 

economy of $100 million or more, or 

adversely affect a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local, or tribal governments or 

communities in a material way (also 

referred to as an ‘‘economically 

significant’’ rule); 

(2) Create serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; 

(3) Materially alter the budgetary 

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or 

(4) Raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

stated in the Executive order. 

This proposed regulatory action is a 

significant regulatory action subject to 

review by OMB under section 3(f) of 

Executive Order 12866. 

We have also reviewed these 

regulations under Executive Order 

13563, which supplements and 

explicitly reaffirms the principles, 

structures, and definitions governing 

regulatory review established in 

Executive Order 12866. To the extent 

permitted by law, Executive Order 

13563 requires that an agency— 

(1) Propose or adopt regulations only 

upon a reasoned determination that 

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their benefits justify their costs 

(recognizing that some benefits and 

costs are difficult to quantify); 

(2) Tailor its regulations to impose the 

least burden on society, consistent with 

obtaining regulatory objectives and 

taking into account—among other things 

and to the extent practicable—the costs 

of cumulative regulations; 

(3) In choosing among alternative 

regulatory approaches, select those 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety, 

and other advantages; distributive 

impacts; and equity); 

(4) To the extent feasible, specify 

performance objectives, rather than the 

behavior or manner of compliance a 

regulated entity must adopt; and 

(5) Identify and assess available 

alternatives to direct regulation, 

including economic incentives—such as 

user fees or marketable permits—to 

encourage the desired behavior, or 

provide information that enables the 

public to make choices. 

Executive Order 13563 also requires 

an agency ‘‘to use the best available 

techniques to quantify anticipated 

present and future benefits and costs as 

accurately as possible.’’ The Office of 

Information and Regulatory Affairs of 

OMB has emphasized that these 

techniques may include ‘‘identifying 

changing future compliance costs that 

might result from technological 

innovation or anticipated behavioral 

changes.’’ 

We are issuing these proposed 

regulations only on a reasoned 

determination that their benefits would 

justify their costs. In choosing among 

alternative regulatory approaches, we 

selected those approaches that 

maximize net benefits to borrowers and 

institutions. Based on the analysis that 

follows, the Department believes that 

these proposed regulations are 

consistent with the principles in 

Executive Order 13563. 

In accordance with both Executive 

orders, the Department has assessed the 

potential costs and benefits, both 

quantitative and qualitative, of this 

regulatory action. The potential costs 

associated with this regulatory action 

are those resulting from statutory 

requirements and those we have 

determined as necessary for 

administering the Department’s 

programs and activities. 

This Regulatory Impact Analysis is 

divided into five sections. The ‘‘Need 

for Regulatory Action’’ section discusses 

why updating the regulatory 

requirements governing PLUS loan 

adverse credit history determinations is 

necessary. 

The ‘‘Summary of Proposed 

Regulations’’ section briefly highlights 

the updates, revisions, and new 

requirements for PLUS loan applicants 

that are included in the proposed 

regulations. 

The ‘‘Costs, Benefits, and Transfers’’ 

section discusses the impact of the 

proposed regulations on institutions of 

higher education, students, and parents. 

We anticipate that the proposed 

regulations would result in a lower 

denial rate for PLUS loan applicants. 

For some parents and graduate and 

professional students who would be 

denied PLUS loans under the current 

standards, the proposed regulations 

would allow them to borrow a PLUS 

loan in an amount up to the cost of 

attendance. 

Under ‘‘Net Budget Impacts,’’ we 

present our estimate that the proposed 

regulations would not have a significant 

net budget impact on the Federal 

government. 

In ‘‘Alternatives Considered,’’ we 

describe other approaches we 

considered for key provisions of the 

proposed regulations, including 

different definitions for adverse credit 

history for parents and graduate 

students, criteria regarding the 

borrower’s ability to repay as part of the 

adverse credit history definition, 

indexing the $2,085 threshold amount 

to the rate of inflation, increasing the 

delinquency period of 90 or more days 

past due, and increasing the length of 

time for the look-back period for debts 

that are in collection or charged off. 

Need for Regulatory Action 

Congress amended the HEA in 2010 to 

end the origination of new loans under 

the FFEL Program. All new subsidized 

and unsubsidized Stafford Loans, PLUS 

Loans, and Consolidation Loans are 

made under the Direct Loan Program. 

To be eligible for a Federal Direct PLUS 

loan, under the statute, an applicant 

must not have an adverse credit history. 

To determine if an applicant has an 

adverse credit history the Department 

conducts a credit check on the 

applicant. A PLUS loan applicant is 

considered to have an adverse credit 

history if the credit report shows the 

applicant is 90 days delinquent on any 

debt, or has been the subject of a default 

determination, bankruptcy discharge, 

foreclosure, repossession, tax lien, wage 

garnishment, or write-off of a title IV, 

HEA program debt in the five years 

preceding the date of the credit report. 

Since 2011, we have made operational 

changes to improve compliance with the 

regulations and the practices of the 

FFEL program. Specifically, the 

Department applied operational 

standards that were similar to those in 

the FFEL program where an applicant 

with debts in collection or charged off 

is considered to have an adverse credit 

history because the applicant is 90 or 

more days delinquent on a debt. Based 

on these standards, more PLUS loan 

applicants were determined to have an 

adverse credit history and had to 

request reconsideration of the PLUS 

loan denial through the Department’s 

process for determining whether 

extenuating circumstances for an 

adverse credit history condition exist. 

After these changes resulted in an 

increase in PLUS loan denials, the 

Department made operational changes 

to balance making the Direct Loan PLUS 

program consistent with the old FFEL 

regulations and the public policy goal of 

maintaining access to higher education. 

In the interest of providing transparency 

to institutions and families, we 

concluded that the operational changes 

that the Department instituted in its 

operating procedures should be updated 

in the regulatory requirements 

governing PLUS loan adverse credit 

history determinations, which were 

originally established in 1994. 

The proposed regulations would 

update the standard for determining if a 

potential borrower has an adverse credit 

history and more specifically would 

amend the definition of ‘‘adverse credit 

history’’ and require PLUS loan 

counseling for a parent or student with 

an adverse credit history who is 

approved for a PLUS loan as a result of 

the Secretary’s determination that 

extenuating circumstances exist. 

Summary of Proposed Regulations 

The proposed regulations would 

update the eligibility requirements for a 

PLUS loan. Specifically, the proposed 

regulations would state more clearly 

that the PLUS loan adverse credit 

history requirements apply to graduate 

student PLUS loan borrowers, as well as 

parent PLUS borrowers. In addition, the 

proposed regulations would define the 

terms ‘‘in collection’’ and ‘‘charged off’’ 

for purposes of determining whether an 

applicant for a PLUS loan has an 

adverse credit history. They would also 

specify that a PLUS loan applicant has 

an adverse credit history if the applicant 

has one or more debts with a total 

combined outstanding balance greater 

than $2,085 that are 90 or more days 

delinquent as of the date of the credit 

report, or that have been placed in 

collection or charged off during the two 

years preceding the date of the credit 

report. The proposed regulations would 

provide that the debt threshold of a 

combined outstanding balance greater 

than $2,085 may be adjusted over time 

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4http://nces.ed.gov/programs/digest/d13/tables/

dt13_331.95.asp 

on a basis determined by the Secretary. 

The proposed regulations would also 

revise the provision that specifies the 

types of documentation the Secretary 

may accept as a basis for determining 

that extenuating circumstances exist for 

a PLUS loan applicant who is 

determined to have an adverse credit 

history. Finally, the regulations would 

specify that an applicant for a PLUS 

loan who is determined to have an 

adverse credit history, but who 

documents to the Secretary’s 

satisfaction that extenuating 

circumstances exist, must complete 

PLUS loan counseling offered by the 

Secretary before receiving the PLUS 

loan. 

Costs, Benefits, and Transfers 

Under the proposed regulations, the 

Department expects that the number of 

approved applications for parent and 

graduate and professional student PLUS 

loans will increase from 2012–2013 

levels, and that this will result in a 

series of costs, benefits, and transfers. 

The most significant factor leading to 

this increase is expected to be the 

establishment of a new standard for the 

determination that an applicant has an 

adverse credit history. In particular, 

under the proposed regulations, an 

adverse credit history means that the 

applicant has one or more debts with a 

total combined outstanding balance 

greater than $2,085 that are 90 or more 

days delinquent as of the date of the 

credit report, or that have been placed 

in collection or charged off during the 

two years preceding the date of the 

credit report. 

Over 70 percent of the PLUS loan 

application denials in the past three 

academic years have been a result of 

delinquent debt that was held by the 

original creditor, charged off, or was in 

collection status. 

Reason for credit check denial 

Academic year 

2011–2012 

(percent) 

Academic year 

2012–2013 

(percent) 

Academic year 

2013–2014 

(through 

February 2014) 

(percent) 

ACCOUNT IN COLLECTION .......................................................................................... 40.9 46 46 

CHARGE OFF ................................................................................................................. 21.3 24 24 

PRESENTLY 90 OR MORE DAYS DELINQUENT ........................................................ 11.1 14 13 

CHAPTER 7, 11, OR 12 BANKRUPTCY ........................................................................ 7.9 5 6 

COUNTY/STATE/FEDERAL GOVERNMENT TAX LIEN WITHIN LAST 5 YEARS ...... 6.4 3 3 

OTHER REASONS .......................................................................................................... 12.3 9 9

We estimate that, under the proposed 

regulations, approximately 33 percent of 

the applicants who were initially denied 

PLUS loans in the 2012–2013 award 

year would have been approved in the 

initial process. 

AY 2012–13 PLUS Number and percentage of 

denied applications in AY 

2012–2013 that would be 

approved under the proposed 

regulations Number 

denied 

Number 

approved Total 

Number Percentage 

All Credit Checks (Original Decision) .............. 1,123,617 1,300,986 2,424,603 371,508 33 

We also believe that the proposed 

regulations would clarify the process by 

which applicants request 

reconsideration, and possibly increase 

the percentage of denied loan applicants 

who eventually qualify for PLUS loans 

after requesting reconsideration or 

obtaining an endorser who does not 

have an adverse credit history. 

Students/Parents 

Parent PLUS loan applicants and their 

dependent students would be affected 

by the proposed regulations. Under the 

proposed regulations, a larger number of 

parent PLUS loan applicants would be 

approved for PLUS loans on behalf of 

their dependent students. As a result, 

some families could accrue higher loan 

debt amounts. 

Unlike Direct Subsidized and 

Unsubsidized loans, PLUS loans do not 

have annual or lifetime aggregate limits. 

PLUS loans can be borrowed in any 

amount up to and including the full cost 

of attendance, which is an amount that 

is determined by individual institutions 

and is beyond the control of the 

Department. 

In the 2011–2012 award year, the 

median total PLUS loan debt for a 

parent who borrowed a PLUS loan at 

any point for a dependent 

undergraduate student ages 18 to 24 in 

the student’s fourth (senior) year or 

above was $27,700.4 If the dependent 

student had borrowed the maximum 

amount of his or her Direct Loans, the 

total debt shared by the parent and 

student would be equal to $58,700, 

$1,300 more than the aggregate limits 

for an independent student. 

Parents who take out PLUS loans on 

behalf of their dependent children are 

acquiring some of the debt burden 

associated with their child’s education. 

Parent PLUS loans have higher interest 

rates and origination fees than Direct 

Subsidized and Direct Unsubsidized 

loans. 

In the example that follows, the 

Department compares two sample 

borrowers to show the potential impact 

of borrowing under the parent PLUS 

Loan Program compared to borrowing 

up to the annual Direct Loan limits for 

independent students. Student A’s 

parent applied for a parent PLUS loan; 

however, Student A’s parent was not 

approved for parent PLUS loans in any 

of the four years. Therefore, Student A 

was eligible to borrow Unsubsidized 

Stafford loans up to the independent 

borrower limits. Students B’s parent was 

approved for parent PLUS loans for all 

four years to help pay for Student B’s 

college education. The total amount 

borrowed by each of the families in this 

example is equal. The example also 

assumes that both borrowers took out 

loans every year of college, the student 

graduated in four years, and repayment 

began following graduation. Student A 

deferred all payments on the 

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5Origination fees for Direct PLUS loans will 

increase to 4.292 percent on October 1, 2014. 

6Origination fees for Direct Subsidized and 

Unsubsidized loans will increase to 1.073 percent 

on October 1, 2014. 

Unsubsidized Stafford loans and 

Student B’s parent deferred payments 

on their PLUS loans until six months 

after graduation. The example also uses 

the current interest rates and origination 

fees (as of July 1, 2014) and assumes 

they remain unchanged through the two 

students’ matriculation (this is only an 

example; although interest rates are 

fixed over the life of the individual loan, 

those rates are updated annually and 

origination fees can be changed.) 

Direct 

subsidized 

Direct 

unsubsidized Interest rate Months until repayment 

Amount owed 

upon entering 

repayment 

Student A: Dependent student whose parents were denied a parent PLUS loan 

1st Year Fall ......................................................................... $ 1750 $ 3,000 0.0466 50 $ 5,424 

1st Year Spring .................................................................... 1,750 3,000 0.0466 45 5,365 

2nd Year Fall ....................................................................... 2,250 3,000 0.0466 38 5,791 

2nd Year Spring ................................................................... 2,250 3,000 0.0466 33 5,731 

3rd Year Fall ........................................................................ 2,750 3,500 0.0466 26 6,717 

3rd Year Spring .................................................................... 2,750 3,500 0.0466 21 6,648 

4th Year Fall ........................................................................ 2,750 3,500 0.0466 14 6,551 

4th Year Spring .................................................................... 2,750 3,500 0.0466 9 6,482 

Total Due 48,709 

Direct 

subsidized 

Direct 

unsubsidized Interest rate 

Amount owed 

upon entering 

repayment 

Parent 

PLUS Interest rate Months until repayment 

Amount owed 

upon entering 

repayment 

Student B: Dependent student with parents approved for PLUS loans 

1st Year Fall ......... $ 1,750 $ 1,000 0.0466 $ 2,995 2000 0.0721 50 $ 2,712 

1st Year Spring .... 1,750 1,000 0.0466 2,975 2000 0.0721 45 2,650 

2nd Year Fall ....... 2,250 1,000 0.0466 3,456 2000 0.0721 38 2,562 

2nd Year Spring ... 2,250 1,000 0.0466 3,436 2000 0.0721 33 2,499 

3rd Year Fall ........ 2,750 1,000 0.0466 3,917 2500 0.0721 26 3,014 

3rd Year Spring .... 2,750 1,000 0.0466 3,897 2500 0.0721 21 2,936 

4th Year Fall ........ 2,750 1,000 0.0466 3,870 2500 0.0721 14 2,827 

4th Year Spring .... 2,750 1,000 0.0466 3,850 2500 0.0721 9 2,748 

Total 28,397 Total 21,949 

Total due at the beginning of repayment—combined 50,345 

As this example demonstrates, at the 

identical school, the combined parentstudent debt upon entering repayment 

would be higher for the family of 

Student B than the total debt of Student 

A because of the higher interest rates 

(currently 7.21 percent for Direct PLUS 

loans and 4.66 percent for Direct 

Subsidized and Unsubsidized loans) 

and origination fees (currently 4.28 

percent for Direct PLUS loans 5 and 1.72 

percent for Direct Subsidized and 

Unsubsidized loans 6). This example is 

only meant to show the potential 

difference between two students using a 

combination of Direct Subsidized, 

Direct Unsubsidized, and Direct PLUS 

loans to fund their education. The 

example does not address choices 

individual borrowers may make to 

manage their student loan debt or the 

benefits of increased access to PLUS 

loans, as discussed below. These tables 

also do not account for a family 

choosing a less expensive school to 

account for the lack of access to PLUS 

loans. These examples also only apply 

to Parent PLUS loans. 

Borrowers may choose to make 

payments on their loans while in school 

to decrease the accumulation of interest 

and decrease the amount of loan debt 

owed after leaving school. Furthermore, 

loan disbursement dates and amounts 

vary by campus. Individual debt loads 

for borrowers under any loan program 

will be impacted by borrower behavior. 

As borrowers enter into repayment, 

their loan payments and principal 

balance amounts will also be impacted 

by borrower behavior. Benefits such as 

loan consolidation, forbearance, 

deferment, and loan forgiveness can 

have an impact on their overall loan 

payments. 

Increased access to PLUS loans may 

allow some students to continue their 

attendance in programs that they 

otherwise would not be able to afford. 

While some applicants may use 

additional Direct Unsubsidized loans to 

cover their educational expenses after 

their applicant parents have been 

denied PLUS loans, others may be 

unable to make up the difference 

because of annual or lifetime aggregate 

limits on Stafford loans. This could 

result in a student having to withdraw 

from a particular education program, 

transfer to another program or 

institution, or find additional means of 

financing his or her education, such as 

private student loans. Since PLUS loans 

can be borrowed up to the cost of 

attendance, they may be used to more 

fully cover funding gaps for dependent 

students who have exhausted their 

annual or lifetime aggregate limits for 

Direct Subsidized and Unsubsidized 

loans or allow students to attend a more 

expensive institution. PLUS loans often 

help lower-income students who may 

lack the personal or family resources to 

pay for college. 

PLUS loans are generally a better 

option for students than private student 

loans. PLUS loans have fixed interest 

rates and offer more flexibility in 

respect to repayment plans (such as 

extended and graduated repayment 

plans). PLUS loans also offer important 

consumer protections such as 

deferments for unemployment, active 

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duty military service, and economic 

hardship; and cancellation for 

occurrences such as death, total and 

permanent disability or school closure. 

Private loans, in contrast, are not 

required to provide such borrower 

benefits and protections. Private loans 

also typically have variable interest 

rates that cost most for those who can 

least afford them.’’ 

Applicants with an adverse credit 

history who qualify for a PLUS Loan by 

demonstrating extenuating 

circumstances will be required to 

participate in loan counseling provided 

by the Department. This requirement 

could help PLUS loan applicants to 

make informed decisions and to avoid 

over-borrowing for their own or their 

child’s education. 

Net Budget Impacts 

The proposed regulations are not 

estimated to have a significant net 

budget impact over the loan cohorts 

from 2014 to 2024. Consistent with the 

requirements of the Credit Reform Act 

of 1990, budget cost estimates for the 

student loan programs reflect the 

estimated net present value of all future 

non-administrative Federal costs 

associated with a cohort of loans. (A 

cohort reflects all loans originated in a 

given fiscal year.) 

In general, student loan cost estimates 

are developed using OMB’s Credit 

Subsidy Calculator. The OMB calculator 

takes projected future cash flows from 

the Department’s student loan cost 

estimation model and produces 

discounted subsidy rates reflecting the 

net present value of all future Federal 

costs associated with awards made in a 

given fiscal year. Values are calculated 

using a ‘‘basket of zeros’’ methodology 

under which each cash flow is 

discounted using the interest rate of a 

zero-coupon Treasury bond with the 

same maturity as that cash flow. To 

ensure comparability across programs, 

this methodology is incorporated into 

the calculator and used governmentwide to develop estimates of the Federal 

cost-of-credit programs. Accordingly, 

we believe that it is the appropriate 

methodology to use in developing 

estimates for the proposed regulations. 

That said, in developing the following 

Accounting Statement, the Department 

consulted with OMB on how to 

integrate our discounting methodology 

with the discounting methodology 

traditionally used in developing 

regulatory impact analyses. 

The operational changes to adverse 

credit history determinations made in 

2011 have already been incorporated 

into the Department’s budget baseline. 

The changes in the proposed 

regulations, including (1) using $2,085 

as an upfront threshold amount in the 

determination of an adverse credit 

history, and (2) the reduced look-back 

period of two years for accounts in 

collection and accounts that have been 

charged off to trigger a determination of 

adverse credit, would likely decrease 

the number of PLUS loan applicants 

denied loans based on an adverse credit 

history determination. This could 

increase PLUS loan volumes, and 

decrease the amount of additional Direct 

Unsubsidized loans taken out by 

student borrowers whose parents cannot 

obtain PLUS loans because of adverse 

credit determinations. Generally, an 

increase in PLUS loan volume results in 

net budget savings because of the 

negative subsidy rate on the overall 

PLUS loan portfolio. 

However, loans made to borrowers 

who would have been considered to 

have an adverse credit history before the 

changes in the proposed regulations 

could have a higher incidence of default 

or could be difficult for borrowers to 

repay. If that were the case, potential 

savings from any increased PLUS loan 

volume resulting from the proposed 

regulations would be reduced or even 

reversed. The Department does not have 

data to determine if borrowers who 

would have been considered to have an 

adverse credit history in the absence of 

the proposed regulations have a greater 

incidence of default or repayment 

difficulty, but, if a subsidy rate were 

available for this subgroup of PLUS 

borrowers, it would likely differ from 

the overall PLUS subsidy rate. The 

budget baseline already reflects the 

$2,085 threshold amount as currently 

used in the Department’s process for 

considering requests for reconsideration 

and most of the charged-off accounts or 

accounts in collection that would result 

in an adverse credit determination fall 

within the two-year period that would 

still be in effect under the proposed 

regulations. These factors could limit 

the increase in PLUS loan volume 

associated with the changes in the 

proposed regulations. Therefore, the 

Department has not estimated 

significant savings from the proposed 

regulations. 

Assumptions, Limitations, and Data 

Sources 

In developing these estimates, a wide 

range of data sources were used, 

including data from the National 

Student Loan Data System; operational 

and financial data from Department of 

Education systems, including the Fiscal 

Operations Report and Application to 

Participate (FISAP) from institutions; 

and data from a range of surveys 

conducted by the National Center for 

Education Statistics such as the 2011– 

2012 National Postsecondary Student 

Aid Survey and the 2004/09 Beginning 

Postsecondary Student Survey. Data 

from other sources, such as the U.S. 

Census Bureau, were also used. 

Accounting Statement 

As required by OMB Circular A–4 

(available at www.whitehouse.gov/sites/ 

default/files/omb/assets/omb/circulars/

a004/a-4.pdf), in Table 3, we have 

prepared an accounting statement 

showing the classification of the 

expenditures associated with the 

proposed regulations. Expenditures are 

classified as transfers from the Federal 

Government to student loan borrowers. 

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TABLE 3—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES ($ IN MILLIONS, 7% AND 3% 

DISCOUNT RATES) 

Category Benefits 

Improved clarity in process for adverse credit determinations for PLUS loans .......................................... Not quantified 

Category Costs 

7% 3% 

Costs of compliance with paperwork requirements .................................................................................... $4.40 $4.43 

Alternatives Considered 

The Department considered various 

alternatives in developing these 

proposed regulations, including 

different definitions of adverse credit 

history for parents and graduate 

students, criteria regarding the 

borrower’s ability to repay as part of the 

adverse credit history definition, 

indexing the $2,085 amount to the rate 

of inflation, increasing the delinquency 

period of 90 or more days past due, and 

increasing the length of time for the 

look-back period for debts that are in 

collection or charged off. 

Some of the non-Federal negotiators 

contended that there should be different 

eligibility standards for PLUS loans for 

parents and students. These negotiators 

argued that graduate and professional 

students should be eligible for PLUS 

loans without application of the adverse 

credit history criteria. 

Alternatively, one non-Federal 

negotiator requested that the 

Department consider defining ‘‘adverse 

credit history’’ differently for graduate 

and professional student PLUS loan 

borrowers than for parent PLUS loan 

borrowers. 

We considered these proposals but 

concluded that the statutory 

requirement that a PLUS loan borrower 

not have an adverse credit history 

applies equally to student and parent 

borrowers. 

Some non-Federal negotiators 

recommended including criteria 

regarding the borrower’s ability to repay 

in the ‘‘adverse credit history’’ 

definition, to prevent overborrowing of 

PLUS loans. However, the Department 

determined that the HEA does not 

currently authorize consideration of the 

borrower’s ability to repay in the 

determination of an adverse credit 

history. 

Several of the non-Federal negotiators 

recommended that the Department 

index the $2,085 debt threshold amount 

to the rate of inflation. The majority of 

these negotiators suggested that the 

Department use the CPI, a measure of 

inflation determined by the Bureau of 

Labor Statistics, as the basis for the 

indexing. 

The Department considered using the 

CPI–U as the basis to index, but 

ultimately decided not to include this in 

the proposed regulations. Instead, the 

Department invites public comment on 

what an appropriate adjustment would 

be to take into account the effects of 

inflation, as well as suggestions for 

other bases for adjusting the $2,085 

threshold amount over time, including 

measures of growth or decline in other 

types of consumer debt. 

Some of the non-Federal negotiators 

argued that the proposed delinquency 

period of 90 or more days past due is 

too short for adverse credit history 

determinations. These negotiators 

recommended extending the period to 

120 days or 180 days past due. They 

asserted that credit reports often have 

errors that may not be corrected during 

a 90-day timeframe. 

In the absence of a consistent 

industry-wide standard, we decided to 

maintain the standard of 90 or more 

days delinquent in the proposed 

regulations. We rely on credit reports to 

determine whether an applicant is 

delinquent on a debt, as the number of 

days a debt is past due is included on 

an individual’s credit report until an 

account is placed in collection. Based 

on our experience, most creditors send 

accounts to collection once they are 90 

days’ delinquent. Once an account is 

placed in collection, the number of days 

past due is generally not reflected on the 

credit report. Therefore, a standard 

beyond the current 90-day standard 

would be more difficult to track. And a 

borrower with a longer delinquency 

would still be able to request 

reconsideration of the PLUS loan denial 

under the process for determining if 

extenuating circumstances exist, which 

would allow the borrower the 

opportunity to explain the individual 

circumstances raised by the negotiators. 

Non-Federal negotiators made varying 

proposals regarding the look-back 

period for debts that are in collection or 

charged off. Some negotiators 

recommended a one-year look-back 

period while other negotiators suggested 

a three-year look-back period. The 

Department considered these proposals 

but determined that it was appropriate 

to propose a two-year look-back period. 

Based on the Department’s review of 

consumer credit standards, the age of a 

consumer’s delinquent or defaulted debt 

bears significantly on a consumer’s 

credit history. While varying 

substantially based on the type of credit 

infraction, typically most negative items 

have little impact after two years. 

Furthermore, as the chart from 

VantageScore shows below, a decline in 

a consumer’s credit score from a 

substantially severe infraction such as a 

default can be remediated within about 

18 months. 

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46654 Federal Register / Vol. 79, No. 153 / Friday, August 8, 2014 / Proposed Rules 

7http://www.mela.net/maine-loan.php. 

8http://www.chesla.org/Customer-Content/

WWW/CMS/files/071137_2011_annualreport.pdf. 

9http://www.rurdev.usda.gov/Support

Documents/CA-SFH-GRHUnderwritingGuide.pdf. 

The Department’s adverse credit 

history evaluation of 90-day debt 

delinquencies, including charge-offs 

and collections, is based upon an 

account’s current status, but it does not 

take into account whether the debts 

have been delinquent for a long period 

of time or entered collections or were 

charged off years ago. Several other 

State student lenders, Federal agencies, 

and some other lenders take into 

account the age of the delinquent debt 

in question when underwriting. For 

example, the Maine Loan, a product 

offered by the Maine Educational Loan 

Authority, requires that applicants have 

no record of a paid or unpaid charge-off 

in the last two years.7 Connecticut 

Higher Education Supplemental Loan 

Authority (CHESLA) loans contain a 

similar two-year look back for debts 

over 90 days delinquent as well as for 

charge-offs and collections.8 At the 

Federal level, Department of Agriculture 

farm loans for operation and ownership 

employ a three-year look back 

standard.9 Presumably, these lenders do 

not find that older delinquent debts 

impact the borrower’s ability or 

willingness to repay a new loan. 

Initial Regulatory Flexibility Analysis 

The proposed regulations will affect 

institutions that participate in the title 

IV, HEA programs, including alternative 

certification programs not housed at 

institutions, and individual borrowers. 

The U.S. Small Business Administration 

(SBA) Size Standards define for-profit 

institutions as ‘‘small businesses’’ if 

they are independently owned and 

operated and not dominant in their field 

of operation, with total annual revenue 

below $7,000,000. The SBA Size 

Standards define nonprofit institutions 

as ‘‘small organizations’’ if they are 

independently owned and operated and 

not dominant in their field of operation, 

or as ‘‘small entities’’ if they are 

institutions controlled by governmental 

entities with populations below 50,000. 

The number of title IV, HEA-eligible 

institutions that are small entities would 

be limited because of the revenues 

involved in the sector that would be 

affected by the proposed regulations and 

the concentration of ownership of 

institutions by private owners or public 

systems. However, the definition of 

‘‘small organization’’ does not factor in 

revenue. Accordingly, several of the 

entities subject to the proposed 

regulations are ‘‘small entities,’’ and we 

have prepared this Initial Regulatory 

Flexibility Analysis. 

Description of the Reasons That Action 

by the Agency Is Being Considered 

The proposed regulations would 

update the standards for determining 

whether a parent or student has an 

adverse credit history for purposes of 

eligibility for a Direct PLUS Loan. The 

proposed regulations would require 

PLUS loan counseling for a parent or 

student with an adverse credit history 

who obtains a PLUS loan as a result of 

the Secretary’s determination that 

extenuating circumstances exist. 

Succinct Statement of the Objectives of, 

and Legal Basis for, the Regulations 

Current Direct Loan regulations (34 

CFR 685.200(b) and (c)) specify that 

graduate and professional students, and 

parents borrowing on behalf of their 

dependent children, may borrow PLUS 

loans. PLUS loan borrowers must meet 

applicable eligibility requirements. 

Description of and, Where Feasible, an 

Estimate of the Number of Small 

Entities To Which the Regulations Will 

Apply 

The proposed regulations would 

affect the approximately 7,500 

institutions that participate in the title 

IV, HEA loan programs, as the amount 

and composition of title IV, HEA 

program aid that is available to students 

affects students’ enrollment decisions 

and institutional choice. Approximately 

60 percent of institutions of higher 

education qualify as small entities. 

Using data from the Integrated 

Postsecondary Education Data System, 

we estimate that 4,365 institutions 

qualify as small entities—1,891 are 

nonprofit institutions, 2,196 are forprofit institutions with programs of two 

years or less, and 278 are for-profit 

institutions with four-year programs. 

Description of the Projected Reporting, 

Recordkeeping, and Other Compliance 

Requirements of the Regulations, 

Including an Estimate of the Classes of 

Small Entities That Will Be Subject to 

the Requirements and the Type of 

Professional Skills Necessary for 

Preparation of the Report or Record 

The proposed regulations would not 

change the reporting requirements 

related to PLUS loans for institutions. 

Accordingly, the Department does not 

expect a change in institutional burden 

from the proposed regulations. 

However, PLUS loan borrowers with an 

adverse credit history who request 

reconsideration based on extenuating 

circumstances must provide satisfactory 

documentation that extenuating 

circumstances exist, and would be 

required to complete loan counseling 

offered by the Secretary. 


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Federal Register / Vol. 79, No. 153 / Friday, August 8, 2014 / Proposed Rules 46655 

Identification, to the Extent Practicable, 

of all Relevant Federal Regulations That 

May Duplicate, Overlap or Conflict With 

the Proposed Regulations 

The proposed regulations are unlikely 

to conflict with or duplicate existing 

Federal regulations. 

Alternatives Considered 

As described above, the Department 

conducted a negotiated rulemaking 

process to develop the proposed 

regulations and considered a number of 

options for some of the provisions. No 

alternatives were aimed specifically at 

small entities. 

Paperwork Reduction Act of 1995 

As part of its continuing effort to 

reduce paperwork and respondent 

burden, the Department provides the 

general public and Federal agencies 

with an opportunity to comment on 

proposed and continuing collections of 

information in accordance with the 

Paperwork Reduction Act of 1995 (PRA) 

(44 U.S.C. 3506(c)(2)(A)). This helps 

ensure that: The public understands the 

Department’s collection instructions, 

respondents can provide the requested 

data in the desired format, reporting 

burden (time and financial resources) is 

minimized, collection instruments are 

clearly understood, and the Department 

can properly assess the impact of 

collection requirements on respondents. 

The table at the end of this section 

summarizes the estimated burden on 

small entities, primarily institutions and 

applicants, arising from the paperwork 

associated with the proposed 

regulations. 

Section 685.200 contains information 

collection requirements. Under the PRA, 

the Department has submitted a copy of 

the section, and will submit the 

Information Collections Request (ICR) to 

OMB for its review. 

A Federal agency may not conduct or 

sponsor a collection of information 

unless OMB approves the collection 

under the PRA and the corresponding 

information collection instrument 

displays a currently valid OMB control 

number. Notwithstanding any other 

provision of law, no person is required 

to comply with, or is subject to penalty 

for failure to comply with, a collection 

of information if the collection 

instrument does not display a currently 

valid OMB control number. 

In the final regulations, we will 

display the control numbers assigned by 

OMB to any information collection 

requirements proposed in this NPRM 

and adopted in the final regulations. 

The burden associated with the new 

regulatory provisions would be 

accounted for in a new information 

collection. 

The current regulations allow PLUS 

loan applicants who have been denied 

a PLUS loan due to an adverse credit 

history determination to submit 

documentation of extenuating 

circumstances to the Secretary and 

request reconsideration of the loan 

application. The proposed regulations 

would require that a PLUS loan 

applicant who is determined to be 

eligible for a PLUS loan after 

reconsideration complete loan 

counseling offered by the Secretary. 

Section 685.200 Borrower Eligibility 

Requirements: Under proposed 

regulations in § 685.200(b)(5) and 

(c)(2)(viii)(A)(3), we have proposed that, 

in addition to providing documentation 

to the Secretary demonstrating that 

extenuating circumstances exist, an 

applicant who is determined to have an 

adverse credit history would also have 

to complete PLUS loan counseling to 

receive the PLUS loan. We believe loan 

counseling would help these PLUS loan 

applicants to understand the 

ramifications of incurring this 

additional debt. 

Burden Calculation: We estimate that 

during the 2013–14 award year there 

were 785,734 PLUS loan denials. Our 

records indicate that, of those PLUS 

loan denials, 147,400 PLUS loans were 

approved after reconsideration based on 

extenuating circumstances. While the 

total number of requests for 

reconsideration (whether approved or 

disapproved) is not available at this 

time, we estimate that the total number 

of approved requests, divided by 90 

percent, approximates the total number. 

We estimate that, on average, each 

borrower’s submission of 

documentation for the Secretary’s 

consideration would take 1 hour per 

submission. 

Our 2013–14 data show that there 

were 8,452 requests from graduate or 

professional students at private forprofit institutions for reconsideration of 

a PLUS loan application based on 

extenuating circumstances; therefore, 

we estimate the burden would increase 

by 8,452 hours (7,607 approved 

reconsideration requests, divided by 90 

percent, multiplied by 1 hour per 

request) under OMB Control Number 

1845–NEW1. 

Our 2013–14 data show that there 

were 23,804 requests from graduate or 

professional students at private 

nonprofit institutions for 

reconsideration of a PLUS loan 

application based on extenuating 

circumstances; therefore, we estimate 

the burden would increase by 23,804 

hours (21,424 approved requests for 

reconsideration, divided by 90 percent, 

multiplied by 1 hour per request) under 

OMB Control Number 1845–NEW1. 

Our 2013–14 data show that there 

were 14,056 requests from graduate or 

professional students for 

reconsideration of a PLUS loan 

application based on extenuating 

circumstances; therefore, we estimate 

the burden would increase by 14,056 

hours (12,650 approved requests for 

reconsideration, divided by 90 percent, 

multiplied by 1 hour per request) under 

OMB Control Number 1845–NEW1. 

Our 2013–14 data show that there 

were 1,672 requests from graduate or 

professional students at foreign 

institutions for reconsideration of a 

PLUS loan application based on 

extenuating circumstances; therefore, 

we estimate the burden would increase 

by 1,672 hours (1,505 approved requests 

for reconsideration, divided by 90 

percent, multiplied by 1 hour per 

request) under OMB Control Number 

1845–NEW1. 

The total increase in burden for 

§ 685.200(b)(5) would be 47,984 hours 

under OMB Control Number 1845– 

NEW1. 

Our 2013–14 data show that there 

were 8,458 submissions from parents of 

students at private for-profit institutions 

for reconsideration of a PLUS loan 

application based on extenuating 

circumstances; therefore, we estimate 

the burden would increase by 8,458 

hours (7,612 approved requests for 

reconsideration, divided by 90 percent, 

multiplied by 1 hour per request) under 

OMB Control Number 1845–NEW1. 

Our 2013–14 data show that there 

were 43,008 submissions from the 

parents of students at private nonprofit 

institutions for reconsideration based on 

extenuating circumstances; therefore, 

we estimate the burden would increase 

by 43,008 hours (38,707 approved 

requests for reconsideration, divided by 

90 percent, multiplied by 1 hour per 

request) under OMB Control Number 

1845–NEW1. 

Our 2013–14 data show that there 

were 64,118 requests from parents of 

students at public institutions for 

reconsideration based on extenuating 

circumstances; therefore, we estimate 

the burden would increase by 64,118 

hours (57,706 approved requests for 

reconsideration, divided by 90 percent, 

multiplied by 1 hour per request) under 

OMB Control Number 1845–NEW1. 

Our 2013–14 data show that there 

were 210 requests from parents of 

students at foreign institutions for 

reconsideration based on extenuating 

circumstances; therefore, we estimate 

the burden would increase by 210 hours 

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46656 Federal Register / Vol. 79, No. 153 / Friday, August 8, 2014 / Proposed Rules 

(189 approved requests for 

reconsideration, divided by 90 percent, 

multiplied by 1 hour per request) under 

OMB Control Number 1845–NEW1. 

The total increase in burden for 

§ 685.200(c)(2)(viii)(A)(3) would be 

115,794 hours under OMB Control 

Number 1845–NEW1. 

We estimate the burden associated 

with the loan counseling requirement 

under proposed 

§ 685.200(c)(2)(viii)(A)(3). All graduate 

and professional students are currently 

required to undergo PLUS loan entrance 

counseling. We estimate that the 

additional loan counseling requirements 

for graduate and professional students 

who qualify for PLUS loans under 

extenuating circumstances would, on 

average, increase loan counseling by 

0.17 hours (10 minutes) for each 

graduate or professional PLUS loan 

applicant who qualifies for a PLUS loan 

due to extenuating circumstances. 

Our 2013–14 data show that there 

were 7,607 approved requests for 

reconsideration based on extenuating 

circumstances from graduate or 

professional students at private forprofit institutions; therefore, we 

estimate the burden would increase by 

1,293 hours (7,607 approved requests 

for reconsideration multiplied by 0.17 

hours per additional counseling 

components) under OMB Control 

Number 1845–NEW1. 

Under proposed § 685.200(b)(5), our 

2013–14 data show that there were 

21,424 approved requests for 

reconsideration based on extenuating 

circumstances from graduate or 

professional students at private 

nonprofit institutions; therefore, we 

estimate the burden would increase by 

3,642 hours (21,424 approved requests 

for reconsideration multiplied by 0.17 

hours per additional counseling 

components) under OMB Control 

Number 1845–NEW1. 

Our 2013–14 data show that there 

were 12,650 approved requests for 

reconsideration based on extenuating 

circumstances from graduate or 

professional students at public 

institutions; therefore, we estimate the 

burden would increase by 2,151 hours 

(12,650 approved requests for 

reconsideration multiplied by 0.17 

hours per additional counseling 

components) under OMB Control 

Number 1845–NEW1. 

Our 2013–14 data show that there 

were 1,505 approved requests for 

reconsideration based on extenuating 

circumstances from graduate or 

professional students at foreign 

institutions; therefore, we estimate the 

burden would increase by 256 hours 

(1,505 approved requests for 

reconsideration multiplied by 0.17 

hours per additional counseling 

components) under OMB Control 

Number 1845–NEW1. 

The total increase in burden for 

§ 685.200(b)(5) would be 7,342 hours 

under OMB Control Number 1845– 

NEW1. 

Under the proposed regulations, there 

would be a new requirement that a 

parent PLUS loan applicant who is 

determined to be eligible for a loan 

based on extenuating circumstances 

would need to participate in loan 

counseling before receiving a loan. 

Therefore, we estimate that, on average, 

each parent PLUS loan borrower who is 

determined to be eligible on the basis of 

extenuating circumstances would take 

45 minutes to complete a PLUS loan 

counseling session. 

Our 2013–14 data show that there 

were 7,612 approved requests for 

reconsideration from parents of students 

at private for-profit institutions based on 

extenuating circumstances; therefore, 

we estimate the burden would increase 

by 5,709 hours (7,612 approved requests 

for reconsideration multiplied by 0.75 

hours per PLUS loan counseling 

session) under OMB Control Number 

1845–NEW1. 

Our 2013–14 data show that there 

were 38,707 approved requests for 

reconsideration from the parents of 

students at private nonprofit institutions 

based on extenuating circumstances; 

therefore, we estimate the burden would 

increase by 29,030 hours (38,707 

approved requests for reconsideration 

times 0.75 hours per PLUS loan 

counseling session) under OMB Control 

Number 1845–NEW1. 

Our 2013–14 data show that there 

were 57,706 approved requests for 

reconsideration from parents of students 

at public institutions based on 

extenuating circumstances; therefore, 

we estimate the burden would increase 

by 43,280 hours (57,706 approved 

requests for reconsideration multiplied 

by 0.75 hours per PLUS loan counseling 

session) under OMB Control Number 

1845–NEW1. 

Our 2013–14 data show that there 

were 189 approved requests for 

reconsideration from parents of students 

at foreign institutions based on 

extenuating circumstances; therefore, 

we estimate the burden would increase 

by 142 hours (189 approved requests for 

reconsideration multiplied by 0.75 

hours per PLUS loan counseling 

session) under OMB Control Number 

1845–NEW1. 

The total increase in burden for 

§ 685.200(c)(2)(viii)(A)(3) would be 

78,161 hours under OMB Control 

Number 1845–NEW1. 

Overall, burden would increase by 

249,281 hours under OMB Control 

Number 1845–NEW1. 

Consistent with the discussion above, 

the following chart describes the 

sections of the proposed regulations 

involving information collections, the 

information being collected, and the 

collections that the Department will 

submit to OMB for approval and public 

comment under the PRA, and the 

estimated costs associated with the 

information collections. The monetized 

net costs of the increased burden on 

applicants and borrowers, using wage 

data developed using BLS data, 

available at www.bls.gov/ncs/ect/sp/

ecsuphst.pdf, is $4,063,280, as shown in 

the chart below. This cost was based on 

an hourly rate of $16.30 for applicants 

and borrowers. 

COLLECTION OF INFORMATION

Regulatory section Information collection 

OMB control number and 

estimated burden 

[change in burden] 

Estimated 

costs 

§ 685.200 (b)(5) and 685.200 

(c)(1) (viii)(A)(3) Borrower Eligibility.

Revises language requiring documentation for extenuating circumstances and augments PLUS loan counseling for graduate and professional students to increase student financial 

literacy. The proposed regulations also require parent PLUS 

loan counseling.

OMB 1845–NEW1. We estimate that the burden would 

increase by 249,281 hours.

$4,063,280 

If you want to comment on the 

proposed information collection 

requirements, please send your 

comments to the Office of Information 

and Regulatory Affairs, OMB, Attention: 

Desk Officer for U.S. Department of 

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Federal Register / Vol. 79, No. 153 / Friday, August 8, 2014 / Proposed Rules 46657 

Education, by fax to (202) 395–6974 or 

send your comments by email to OIRA_

DOCKET@omb.eop.gov. You may also 

send a copy of these comments to the 

Department contact named in the 

ADDRESSES section of this preamble. 

We have prepared an Information 

Collection Request (ICR) for this 

collection. In preparing your comments 

you may want to review the ICR, which 

is available at www.reginfo.gov. On 

www.reginfo.gov, click on ‘‘Information 

Collection Review.’’ This proposed 

collection is identified as proposed 

collection 1845–NEW1. 

We consider your comments on this 

proposed collection of information in— 

• Deciding whether the proposed 

collection is necessary for the proper 

performance of our functions, including 

whether the information will have 

practical use; 

• Evaluating the accuracy of our 

estimate of the burden of the proposed 

collection, including the validity of our 

methodology and assumptions; 

• Enhancing the quality, usefulness, 

and clarity of the information we 

collect; and 

• Minimizing the burden on those 

who must respond. This includes 

exploring the use of appropriate 

automated, electronic, mechanical, or 

other technological collection 

techniques. 

OMB is required to make a decision 

concerning the collection of information 

contained in these proposed regulations 

between 30 and 60 days after 

publication of this document in the 

Federal Register. Therefore, to ensure 

that OMB gives your comments full 

consideration, it is important that OMB 

receives your comments by September 

8, 2014. This does not affect the 

deadline for your comments to us on the 

proposed regulations. 

Intergovernmental Review 

These programs are not subject to 

Executive Order 12372 and the 

regulations in 34 CFR part 79. 

Assessment of Educational Impact 

In accordance with section 411 of the 

General Education Provisions Act, 20 

U.S.C. 1221e–4, the Secretary 

particularly requests comments on 

whether the proposed regulations would 

require transmission of information that 

any other agency or authority of the 

United States gathers or makes 

available. 

Accessible Format: Individuals with 

disabilities can obtain this document in 

an accessible format (e.g., braille, large 

print, audiotape, or compact disc) on 

request to one of the persons listed 

under FOR FURTHER INFORMATION

CONTACT. 

Electronic Access to This Document: 

The official version of this document is 

the document published in the Federal 

Register. Free Internet access to the 

official edition of the Federal Register 

and the Code of Federal Regulations is 

available via the Federal Digital System 

at: www.gpo.gov/fdsys. At this site you 

can view this document, as well as all 

other documents of the Department 

published in the Federal Register, in 

text or Adobe Portable Document 

Format (PDF). To use PDF you must 

have Adobe Acrobat Reader, which is 

available free at the site. 

You may also access documents of the 

Department published in the Federal 

Register by using the article search 

feature at: www.federalregister.gov. 

Specifically, through the advanced 

search feature at this site, you can limit 

your search to documents published by 

the Department. 

(Catalog of Federal Domestic Assistance 

Number: 84.268 William D. Ford Federal 

Direct Loan Program) 

List of Subjects in 34 CFR Part 685 

Administrative practice and 

procedure, Colleges and universities, 

Consumer protection, Grant programs— 

education, Loan programs—education, 

Reporting and recordkeeping 

requirements, Student aid, Vocational 

education. 

Dated: August 4, 2014. 

Arne Duncan 

Secretary of Education. 

For the reasons discussed in the 

preamble, the Secretary of Education 

proposes to amend part 685 of title 34 

of the Code of Federal Regulations as 

follows: 

PART 685—WILLIAM D. FORD 

FEDERAL DIRECT LOAN PROGRAM 

■ 1. The authority citation for part 685 

continues to read as follows: 

Authority: 20 U.S.C. 1070g, 1087a, et seq., 

unless otherwise noted. 

■ 2. Section 685.200 is amended by: 

■ a. In paragraph (b)(5), removing the 

words ‘‘of paragraph (c)(1)(vii)’’ and 

adding, in their place, the words ‘‘that 

apply to a parent under paragraphs 

(c)(2)(viii)(A) through (D)’’; and 

■ b. Revising paragraph (c) to read as 

follows: 

§ 685.200 Borrower eligibility. 

* * * * * 

(c) Parent PLUS borrower—(1) 

Definitions. The following definitions 

apply to this paragraph (c): 

(i) Charged off means a debt that a 

creditor has written off as a loss, but 

that is still subject to collection action. 

(ii) In collection means a debt that has 

been placed with a collection agency by 

a creditor or that is subject to more 

intensive efforts by a creditor to recover 

amounts owed from a borrower who has 

not responded satisfactorily to the 

demands routinely made as part of the 

creditor’s billing procedures. 

(2) Eligibility. A parent is eligible to 

receive a Direct PLUS Loan if the parent 

meets the following requirements: 

(i) The parent is borrowing to pay for 

the educational costs of a dependent 

undergraduate student who meets the 

requirements for an eligible student 

under 34 CFR part 668. 

(ii) The parent provides his or her and 

the student’s social security number. 

(iii) The parent meets the 

requirements pertaining to citizenship 

and residency that apply to the student 

under 34 CFR 668.33. 

(iv) The parent meets the 

requirements concerning defaults and 

overpayments that apply to the student 

in 34 CFR 668.32(g). 

(v) The parent complies with the 

requirements for submission of a 

Statement of Educational Purpose that 

apply to the student under 34 CFR part 

668, except for the completion of a 

Statement of Selective Service 

Registration Status. 

(vi) The parent meets the 

requirements that apply to a student 

under paragraph (a)(1)(iv) of this 

section. 

(vii) The parent has completed 

repayment of any title IV, HEA program 

assistance obtained by fraud, if the 

parent has been convicted of, or has 

pled nolo contendere or guilty to, a 

crime involving fraud in obtaining title 

IV, HEA program assistance. 

(viii)(A) The parent— 

(1) Does not have an adverse credit 

history; 

(2) Has an adverse credit history but 

has obtained an endorser who does not 

have an adverse credit history; or 

(3) Has an adverse credit history but 

documents to the satisfaction of the 

Secretary that extenuating 

circumstances exist and completes 

PLUS loan counseling offered by the 

Secretary. 

(B) For purposes of this paragraph (c), 

an adverse credit history means that the 

parent— 

(1) Has one or more debts with a total 

combined outstanding balance greater 

than $2,085, as may be adjusted over 

time on a basis determined by the 

Secretary, that are 90 or more days 

delinquent as of the date of the credit 

report, or that have been placed in 

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46658 Federal Register / Vol. 79, No. 153 / Friday, August 8, 2014 / Proposed Rules 

collection or charged off, as defined in 

paragraph (c)(1) of this section, during 

the two years preceding the date of the 

credit report; or 

(2) Has been the subject of a default 

determination, bankruptcy discharge, 

foreclosure, repossession, tax lien, wage 

garnishment, or write-off of a debt under 

title IV of the Act during the five years 

preceding the date of the credit report. 

(C) For purposes of this paragraph (c), 

the Secretary does not consider the 

absence of a credit history as an adverse 

credit history and does not deny a 

Direct PLUS loan on that basis. 

(D) For purposes of this paragraph (c), 

the Secretary may determine that 

extenuating circumstances exist based 

on documentation that may include, but 

is not limited to— 

(1) An updated credit report for the 

parent; or 

(2) A statement from the creditor that 

the parent has repaid or made 

satisfactory arrangements to repay a 

debt that was considered in determining 

that the parent has an adverse credit 

history. 

(3) For purposes of paragraph (c)(2) of 

this section, a ‘‘parent’’ includes the 

individuals described in the definition 

of ‘‘parent’’ in 34 CFR 668.2 and the 

spouse of a parent who remarried, if that 

spouse’s income and assets would have 

been taken into account when 

calculating a dependent student’s 

expected family contribution. 

[FR Doc. 2014–18673 Filed 8–7–14; 8:45 am] 

BILLING CODE 4000–01–P 

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