December 4, 2008
Focus on HEOA: PLUS Loans
Over the next several months, OGSLP's Online News will continue to highlight various provisions of the Higher Education Opportunity Act (HEOA). This month, we've provided a summary of the changes made to PLUS loans.
Parent PLUS and Grad PLUS Loans - Extenuating Circumstances
The HEOA revised the "extenuating circumstances" provision in the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA) that allows, but does not require, lenders to approve PLUS loans if extenuating circumstances exist.
HEOA “extenuating circumstances” are defined as:
- Up to 180 days delinquent on mortgage loan payments; or
- Up to 180 days delinquent on medical payments for the applicant or applicant’s family.
The adverse credit definitions revert back to the regulatory requirements in effect prior to ECASLA for debts other than a mortgage loan or medical bill. A PLUS loan applicant is considered to have adverse credit if any of the following conditions apply:
- The applicant is 90 days or more delinquent on the repayment of any debt.
- The applicant has had any debt discharged in bankruptcy during the five-year period before the date of the credit report.
- The applicant has been the subject of a default determination on any debt, foreclosure, tax lien, repossession, wage garnishment, or write-off of a Title IV debt during the five-year period before the date of the credit report.
The HEOA extenuating circumstances provisions are effective for loans first disbursed on or after July 1, 2008, for extenuating circumstances existing between January 1, 2007 and December 31, 2009.
Parent PLUS Loan Deferment
The HEOA added new deferments for borrowers of parent PLUS loans first disbursed on or after July 1, 2008 and made the deferments loan-specific, rather than borrower-specific. A parent PLUS loan borrower may defer his or her loan:
- When the borrower is enrolled at least half-time at an eligible school.
- When the student for whom the parent acquired the loan is enrolled at least half-time at an eligible school (upon borrower request).
- During the six-month period immediately following the date on which the borrower ceased to be enrolled at least half-time at an eligible school (upon borrower request).
- During the six-month period following the date on which the student for whom the parent acquired the loan is enrolled at least half-time at an eligible school (upon borrower request).
Grad PLUS Loan Deferment
The HEOA added a new deferment provision for Grad PLUS loan borrowers. A Grad PLUS loan borrower may defer his or her loan for the six-month period immediately following the date on which the borrower ceased to be enrolled at least half-time at an eligible school.
For Grad PLUS loans first disbursed on or after July 1, 2008, in-school deferment and deferment for the six-month period immediately following a period of at least half-time enrollment are available on a loan-specific, rather than borrower-specific, basis.
If a Grad PLUS loan borrower receives a loan on or after July 1, 2008 and is eligible for the new deferment on the new Grad PLUS loan and has prior Grad PLUS loan(s) that are not eligible, the lender has the option to align repayment start dates through a discretionary forbearance.
Parent PLUS and Grad PLUS Loans - Repayment Start Date
The HEOA reverses the ECASLA provision regarding the optional deferred repayment start date. Effective July 1, 2008, repayment of a PLUS loan begins within 60 days of the final disbursement, as was the requirement prior to ECASLA.
Parent PLUS and Grad PLUS Loans - Capitalized Interest
The HEOA reverses the ECASLA capitalization provisions; it stipulates that upon agreement by the borrower and lender, the interest accrued during any of the in-school or grace period deferments be paid monthly, quarterly, or capitalized by the lender no more frequently than quarterly (the practice in place prior to ECASLA). This is effective for loans first disbursed on or after July 1, 2008.
For more information about HEOA provisions related to PLUS loans, contact OGSLP’s Policy, Compliance and Training (PCT) department at 405.234.4432 or pct@ogslp.org. We’re here to help!