Protecting Educational Loans for Underserved Students Act

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Protecting Educational Loans for 
Underserved Students Act''.

SEC. 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) 
is amended by adding at the end the following:
    ``(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)) and within a timeframe that would 
                ensure the most accurate, current representation of the 
                student's credit history before the first day of the 
                period of enrollment for which the loan is intended;
                    ``(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' means a graduate or professional student or the 
        parents of a dependent student.''.

SEC. 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), 1098a) shall not apply to the amendment made by section 
2, or to any regulations promulgated under such amendment.

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.