PLUS Loan Exceptional Circumstances
Chad Olson, Assistant Director, Iowa State University
IASFAA Fall Conference - November 2014
Why look at Exceptional
Circumstances?
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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
$100
• 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
Borrowers
• 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.
• http://ifap.ed.gov/fsahandbook/attachments/
1415FSAHbkVol3Ch5.pdf
14/15 Vol 3, Chap 5, page 109
What are some Exceptional
Circumstances?
• 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
list
Criteria for Additional Unsubsidized
Stafford Loans
• What doesn’t grant additional eligibility?
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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
granted
• 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
assistance
• FAFSA may indicate receipt of public
assistance
• 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
annually
• Document, document, document!
• Parent’s eligibility can change during the year,
even after a previous PLUS Loan
Tools to assist you
• ISIR
• 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
borrowing
• 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
determination
– 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
Midwest
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
circumstances?
• 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
denied
• 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
• https://www.federalregister.gov/articles/2014
/10/23/2014-25266/william-d-ford-federaldirect-loan-program#h-10
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
circumstances
PLUS Loan Eligibility Final Regs Summary
• Extends credit check validity from 90 to 180
days
• 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
Acknowledgements
• Aaron Steffens – Luther College
• Kendra Heaton & Cyndi Peiffer – William Penn
University
• Sara Harrington – University of Iowa
• Brittany Peterson – Iowa State University
Questions?
• Contact info:
Chad Olson
chado@iastate.edu
(515) 294-8825