Protecting Educational Loans for Underserved Students Act

To amend adverse credit history determinations for purposes of Federal Direct PLUS Loan eligibility. 1. Short title This Act may be cited as the Protecting Educational Loans for Underserved Students Act 2. Adverse credit history determinations for Federal Direct PLUS Loan eligibility Section 455 of the Higher Education Act of 1965 ( 20 U.S.C. 1087e (r) Federal Direct PLUS Loans (1) In general Beginning July 1, 2014, in determining the eligibility of a student to borrow Federal Direct PLUS Loans, the Secretary shall determine whether the student has an adverse credit history in accordance with paragraph (2). (2) Determination of adverse credit history In determining whether a student has an adverse credit history for purposes of paragraph (1), the Secretary— (A) shall obtain a credit report on the student from at least one consumer reporting agency described under section 603(p) of the Fair Credit Reporting Act ( 15 U.S.C. 1681a(p) (B) unless the Secretary determines that the student has extenuating circumstances, shall consider that a student has an adverse credit history based on the student’s credit report, if— (i) the student is considered 90 or more days delinquent on the repayment of a debt exceeding $2,000; or (ii) during the 3 years before the date of the credit report, the student has been the subject of a— (I) default determination; (II) bankruptcy discharge; (III) foreclosure; (IV) repossession; (V) tax lien; (VI) wage garnishment; or (VII) write-off of a debt under this title; (C) shall not consider a student with debt that is unrelated to loans made under this title and that, as of the date of the student’s credit report, are in collections or have been charged off, to have an adverse credit history and shall not deny a Federal Direct PLUS Loan to the student for having such debt; (D) shall require that any student described in subparagraph (C) or a student who has been the subject of 1 or more of the actions described in subclauses (I) through (VII) of subparagraph (B)(ii) during a period ending more than 3 years before the date of the student’s credit report, to participate in loan counseling provided by the applicable institution of higher education as a condition of being eligible to receive a Federal Direct PLUS Loan; (E) shall not consider a student with no credit history as an individual with an adverse credit history, and shall not use a student’s absence of credit history as a reason to deny a Federal Direct PLUS Loan to such student; (F) shall retain a record of the Secretary’s basis for determining that the student has extenuating circumstances under subparagraph (B), which may include an updated credit report, debt related to a medical condition, a statement from a creditor that the student has made satisfactory arrangements to repay the debt owed to the creditor, a satisfactory statement from the student explaining any delinquencies with outstanding balances of less than $2,000, or a reduction of the credit requirements under this subsection in response to a natural disaster or poor economic conditions that are unforeseen or prolonged; and (G) in a case in which the Secretary determines that a student does not to have an adverse credit history in accordance with this subsection, shall consider such determination to be in effect for a 2-year period beginning on the date the Secretary makes such determination. (3) Definition For purposes of this subsection, the term student . 3. Inapplicability of title IV negotiated rulemaking requirement and master calendar exception Sections 482(c) and 492 of the Higher Education Act of 1965 ( 20 U.S.C. 1089(c)

Summary: Protecting Educational Loans for Underserved Students Act - Amends title IV (Student Assistance) of the Higher Education Act of 1965 to establish criteria for the Secretary of Education to use in determining whether the credit history of applicants for William D. Ford Federal Direct PLUS loans renders them ineligible for such loans. (Federal Direct PLUS loans are provided to graduate or professional degree students and the parents of dependent undergraduate students.) Directs the Secretary to consider an applicant to have an adverse credit history on the basis of his or her credit report, absent a determination that the applicant has extenuating circumstances, if : (1) the applicant is 90 or more days delinquent on the repayment of a debt exceeding $2,000; or (2) during the three years before the credit report date, the applicant has been subject to a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a title IV debt. Requires applicants that have been subject to such actions to participate in loan counseling provided by the applicable institution of higher education before becoming eligible for Federal Direct PLUS loans. Prohibits the Secretary from: (1) denying a Federal Direct PLUS loan to an applicant for having debt that is unrelated to title IV loans and is in collection or has been charged off, provided the applicant participates in such loan counseling; or (2) using the applicant's lack of a credit history as a reason to deny a Federal Direct PLUS loan to such applicant. Requires the Secretary to retain a record of the Secretary's basis for determining that an applicant has extenuating circumstances that make the applicant eligible for a Federal Direct PLUS loan despite having an adverse credit history. Makes the Secretary's determination that an applicant does not have an adverse credit history effective for the two years following such determination.