Loan Exception Circumstances

PLUS Loan Exceptional Circumstances
Chad Olson, Assistant Director, Iowa State University
IASFAA Fall Conference - November 2014
Why look at Exceptional
Parents’ ability to borrow has changed
Lack of ability to borrow privately
Differing economic circumstances
As always, it’s for the students!
DL PLUS Loan Criteria
• Cannot be 90 days or more delinquent on any
debt over $2,085
– New amount as of 10/23/2014 final regs
– Will be adjusted, based on CPI increase more than
• For 5 years preceding the credit report, no
debt in default, foreclosure, bankruptcy
discharge, repossession, tax lien, wage
garnishment or write off of an FSA debt
Possible Eligibility Concerns for Parent
• Overpayment on FSA Grant
• Default on FSA Loan
• Stafford loan cancelled for Total and
Permanent Disability (TPD)
• All of the above can be waived if satisfactory
repayment arrangements have been made
The FSA Handbook tells us…
• 2014/2015 FSA Handbook lists “exceptional
circumstances” on in Volume 3, Chapter 5,
page 109.
14/15 Vol 3, Chap 5, page 109
What are some Exceptional
• Parent is incarcerated
• Parent’s whereabouts are unknown
• Parents have filed for bankruptcy and has
documentation prohibiting further borrowing
• Parent is on disability or public assistance
• Parent’s existing debt to income ratio
• Parent does not meet citizenship
requirements for PLUS Loan
Other Exceptional Circumstances
• The examples in the previous slide are
examples given by the Department, but
should not be considered as an all-inclusive
Criteria for Additional Unsubsidized
Stafford Loans
• What doesn’t grant additional eligibility?
Parent’s unwillingness to borrow
School’s decision not to participate in PLUS Loan program
FAO’s belief that a parent shouldn’t borrow a PLUS Loan
One parent approved, one parent denied
Parent credit denial in previous years
Parent is incarcerated
• Check on the web
• Have student provide documentation of
formal court proceeding
• Where is the other parent?
Parent’s whereabouts are unknown
• May be independent already
Parent has filed for bankruptcy
• Additional debt cannot be incurred during the
bankruptcy proceeding until discharge is
• Conditions of the bankruptcy discharge could
include inability to take on additional debt for
specified time period
• Parents will have plenty of documentation of
bankruptcy proceedings from the court
Parent is on disability or public
• FAFSA may indicate receipt of public
• Tax return may show disability payments and
will also show if income is limited to disability
• Verification forms may indicate
Parent’s existing debt to income ratio
• If school is using this option, they need to
establish a debt to income ratio and
document in P & P
• Common debt to income ratio is 40%
Parent does not meet citizenship
requirements for PLUS Loan
• Check the ISIR you have on file
• Is the other parent a citizen?
• Foreign Income Tax Return
Things to remember
• This is professional judgment
• Exceptional circumstances must be reviewed
• Document, document, document!
• Parent’s eligibility can change during the year,
even after a previous PLUS Loan
Tools to assist you
• Possibly an admissions application
• DHHS Poverty Guidelines
– 2014 Family of 2 = $15,730
– Add $4,060 for each additional family member
– Different for Alaska and Hawaii
• Monthly income and expenses of parent
One Institution's Process
• Discuss other options first including PLUS and
private loans
• In conversation, family shares a concern about
• Learn about family’s concerns
– Level of debt
– Inability to make payments
– Credit history
One Institution's Process
• If concern is debt level or inability to repay,
have family complete institutional
income/expense form
– Use results to make unsubsidized loan
– Utilize other file information (EFC, supp app)
– Does the parent have ability to make a monthly
loan payment of $50 after other expenses are
taken into account
One Institution's Process
• If credit history is the concern, collect
authorization to run credit
– Only use this route if good indicators that credit
will be denied
– Use income/expense form if we think credit might
be approved
– Different credit bureaus can have different results
• Trans Union dominant in Iowa because based in the
One Institution's Process
• Income/expense form almost always reveals
families operating in or dangerously close to
the red each month
• Use of different loan code to track additional
unsub loans due to PJ
• Review previous year’s file in awarding next
year’s aid to determine if additional unsub
previously awarded
Student’s eligibility for Unsub
• What can student borrow under these
• What if student has borrowed their base
aggregate in Stafford Loans?
Student’s eligibility for Unsub
• From the FSA Handbook, 14/15 Volume 3,
Chapter 5, page 97
• Review annual and aggregate loan limit charts
Student’s eligibility for Unsub
Student’s eligibility for Unsub
• Student may have reached $31,000 limit, but
they could borrow up to $12,500 if parents are
• Undergraduate student cannot exceed
aggregate limit of $57,500
• Student eligibility changes with parents’
annual eligibility!
PLUS Loan Eligibility Final Regs
• Published 10/23/2014
PLUS Loan Eligibility Final Regs Summary
• Establishes outstanding balance level of $2085
for bankruptcies and determines mechanism
to adjust level
• Clarifies acceptable documentation for
adverse credit appeals
• Establishes PLUS Loan counseling criteria
– Borrowers using an endorser
– Borrowers who document extenuating
PLUS Loan Eligibility Final Regs Summary
• Extends credit check validity from 90 to 180
• Enhanced PLUS Loan consumer information
will be available for 15/16 school year
• Default rate information on Parent and
Graduate PLUS Loans will be calculated
• Aaron Steffens – Luther College
• Kendra Heaton & Cyndi Peiffer – William Penn
• Sara Harrington – University of Iowa
• Brittany Peterson – Iowa State University
• Contact info:
Chad Olson
[email protected]
(515) 294-8825