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William D. Ford Federal Direct Loan Program rule (2015)

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The William D. Ford Federal Direct Loan Program rule is a significant rule issued by the U.S. Department of Education that implemented final regulations amending eligibility and administrative criteria related to the Federal Direct PLUS Loan Program. Specifically, the rule defined certain terms related to credit histories affecting PLUS loan eligibility. The final rule took effect on March 29, 2015, following the publication of an announcement of early implementation date.[1][2]

HIGHLIGHTS
  • Name: William D. Ford Federal Direct Loan Program
  • Agency: Office of Postsecondary Education, Department of Education
  • Type of significant rule: Economically significant rule

    • Timeline

    The following timeline details key rulemaking activity:

    • March 29, 2015: The final rule took effect following the publication of an announcement of early implementation date.[2]
    • January 14, 2015: The Department of Education published an announcement of early implementation date, which moved the new effective date for the rule to March 29, 2015.[1]
    • October 23, 2014: The Department of Education published final regulations, which were scheduled to take effect July 1, 2015.[1]
    • September 8, 2014: The Department of Education closed the comment period.[3]
    • August 8, 2014: The Department of Education published a notice of proposed rulemaking and opened the comment period.[3]

    Background

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    The Higher Education Act (HEA) was enacted by President Lyndon B. Johnson (D) in 1965, establishing several financial aid programs for college students. The law was reauthorized, usually with amendments, every five years from 1965 through 2008 when the Higher Education Opportunity Act (HEOA) reauthorized the HEA through 2013. The HEOA incorporated several amendments that became effective in 2010, including a change that moved "all new subsidized and unsubsidized Stafford loans, PLUS loans, and Consolidation loans" under the Direct Loan Program.[1] The change ended "the origination of new loans under the Federal Family Education Loan (FFEL) Program."[1][4]

    The HEA, as amended, disqualified applicants who had an adverse credit history based on a Department of Education credit check from receiving direct PLUS loans. An applicant was deemed to have an adverse credit history if he or she was "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."[1] The final rule defined and amended some terms and regulations related to credit histories affecting PLUS loan eligibility.[1]

    The version of the regulations in 34 CFR 685 as of April 2023 can be read here.

    Summary of the rule

    The following is a summary of the rule from the rule's entry in the Federal Register:

    “ The Secretary amends the regulations governing the William D. Ford Federal Direct Loan (Direct Loan) Program. These regulations strengthen and improve administration of the Federal Direct PLUS Loan Program authorized under title IV of the Higher Education Act of 1965, as amended (HEA).[1][5] ”

    Summary of provisions

    The following is a summary of the provisions from the rule's entry in the Federal Register. The entry said the rule would:[1]

    “
    • 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 will be increased over time based on the rate of inflation, as measured by the Consumer Price Index for All Urban Consumers (CPI-U).
    • 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 obtains an endorser, must complete PLUS loan counseling offered by the Secretary before receiving a PLUS loan.
    • 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.[5]
    		 ”

    Significant impact

    See also: Significant regulatory action

    The Office of Management and Budget (OMB) deemed this rule economically significant pursuant to Executive Order 12866. An agency rule can be deemed a significant rule if it has had or might have a large impact on the economy, environment, public health, or state or local governments. The term was defined by E.O. 12866, which was issued in 1993 by President Bill Clinton.[1]

    Text of the rule

    The full text of the rule is available below:[1]

    See also

    External links

    Footnotes

    1. ↑ 1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 Federal Register, "William D. Ford Federal Direct Loan Program," October 23, 2014
    2. ↑ 2.0 2.1 Federal Register, "William D. Ford Federal Direct Loan Program," January 14, 2015
    3. ↑ 3.0 3.1 Federal Register, "William D. Ford Federal Direct Loan Program," August 8, 2014
    4. ↑ Investopedia, "The Higher Education Act of 1965 (HEA): Definition and Provisions," accessed April 25, 2023
    5. ↑ 5.0 5.1 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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