Johnny C. Taylor Jr.,
Thurgood Marshall College Fund
Five Octobers ago, the Department of Education changed the way it interpreted the definition of adverse credit for the Parent PLUS Loan (PPL) program – which parents and students may use to help pay college expenses.
Under the new definition, delinquencies older than 90 days could result in denial of a PPL. Delinquencies include charge-offs, medical collections, and even issues as simple as late payment for mobile telephone bills.
Across America, an estimated 400,000 students were impacted. But historically Black colleges and universities were disproportionately affected.
It disproportionately impacted HBCUs because 90 percent of our student body relies on loans, explained Johnny Taylor, president and CEO of the Thurgood Marshall College Fund (TMCF.)
TMCF is the only organization representing 300,000 students attending Americas 47 publicly supported historically Black colleges and universities.
They argued about the merits of making this change, but the fact that (they) didnt tell us and we were going to be impacted is problematic, Taylor said.
Taylor still finds it troubling that the four leading advocates for Black education- the Thurgood Marshall Fund, United Negro College Fund, (which awards 10,000 scholarships for students from low- and moderate-income families to attend 900 colleges and universities), the National Association for Equal Opportunity in Higher Education (umbrella organization of the nations Historically Black Colleges and Universities and Predominantly Black Institutions), and the Presidents Board of Advisers on HBCUs-who meet one on one with the secretary of education every quarter, were the last to know.
The next several months saw a drawn out battle with the education department seeking to justify its new policy. By September 2013, the outcry was so great they backed down. They also conceded that Parent PLUS loans default at a significantly lower rate than the federal Stafford loans, the most popular student loan program available to undergraduate and graduate students. Federal Stafford loans offer low, fixed interest rates and subsidized interest to eligible undergraduates.
It doesnt make sense that a parent can get $30,000 for a BMW, but that same parent cant get a Parent PLUS loan, Taylor said.
Meanwhile, wed already lost a class of students. Literally within the middle of their education and they had to drop out. We had seniors, juniors, STEM majors, specific names of people, he added. Our position has always been if youre going to change the rules, do it on a going forward basis, not to students who are already in the program.
But efforts to have students already in the PPL program grandfathered failed.
We pushed for a rule that would let incoming freshmen understand [PPL] is not going be a source of funding to parents with less than good credit. But for students already in school, matriculating and getting ready for graduation, pulling the rug from underneath them is fundamentally unfair. Even if you take the legal requirement that there must be consistency between programs, at least grandfather people who were already in the program, Taylor said.
On Capitol Hill, Congressmen and women said it wasnt a legislative issue. So the education advocates decided, as a last resort, to take the Obama administration to court. Although hundreds of Black parents lined up behind TMCF, UNCF, and NAFEO, and despite having children working jobs, no longer in college, they just werent prepared to see the action through.
I was frustrated obviously, Taylor said. But I could understand the level of pride in the Black community in having an African American president. Even though the community was disproportionately affected, they werent going to support court action. We backed off of it.
But not before laying out what he called the doomsday scenario.
Youre going to wake up four, five, six years from now and its going to show there was a significant drop in enrollment at HBCUs, he warned. The enrollment of African American students has been impacted for years to come. Youre going to have financial problems, higher default rates.
Education, business, and policy
In the end, business leaders interested in the future of education rallied to the funds appeal. Lowes Companies Inc., which operates a chain of retail home improvement and appliance stores in the United States, Canada and Mexico, made an unbudgeted donation of $500,000, swelling the coffers of a gap scholarship program set up to help struggling students and their families who were impacted by PLUS loan changes graduate. The program ran successfully in 2013 and 2014.
Last April, Congressional Black Caucus Members, Rep. Corrine Brown (FL-05) and Rep. Cedric Richmond (LA-02) introduced the Protecting Educational Loans for Underserved Students Act (the PLUS Act), a bill that will restore core credit standards used by the Department of Education (ED) prior to the change to the definition of adverse credit made in 2011.
The bill will also provide additional criteria for determining whether a parent has an adverse credit history and includes a new loan counseling provision to help ensure that parents who receive PLUS Loans fully understand the terms and conditions of the loans and their repayment obligations.
Were continuing the process, Taylor said. Were working on a financial aid literacy education program targeted at 10/11/12th-grade students, first-generation college students and underrepresented students.
Our community has to understand that Uncle Sam doesnt go away; a loan has to be repaid. You cant just walk away. Were having lots of conversations about financial aid literacy. We have to do much better in our community before kids go to college, Taylor said.
The Dos and Donts of College Loans
Tanya Wilkerson, Morgan State University director of financial aid, provides information on ways to pay for education, federal and private student aid options, including aid programs for that specific school.
USBE: What should students know ahead of applying for loans?
Tanya Wilkerson: The first thing students should know about loans are the costs associated with attending their chosen school. How much is tuition? Room and board? Are there any additional costs that will need to be covered, like buying a new computer, books, registration fees, deposits, etc.? Will you be receiving assistance in the form of scholarship, grants or even out of pocket from a family member? After you filled out the FAFSA, what were you awarded and will that cover the costs? Basically, you need to find out what resources will be assisting you with the cost of education, and the remainder is what will be covered in loans. Now that has been determined, you need to know what kind of loan will need. Will a parent, if dependent, be able to take out a Parent PLUS Loan? If not, your only choice is an alternative loan. Most students will need a co-signer. You will need to know if you can get a co-signer before you apply. Students should also know their credit score. Lastly, it is important to understand the basic loan terms, like APR, interest, principal, disbursement, origination fee, etc.
USBE: What should they expect?
TW: Students should expect a process. Applying for loans requires you to fill out forms, get information, and fill out more forms. In the instant age that we are in, peoples expectations are for instantaneous decisions. You may be able to receive that for a Parent PLUS Loan, but alternative loans could ask for more information, such as W2s, employment verification, disclosure statements, promissory notes and other various documents. Students should also expect to get denied. The loan process can be a finicky beast at times; you may have to apply for multiple loans, you may have to find another cosigner or you may have filled out the application wrong and have to start again. I always counsel my students to be prepared to be a little frustrated about the loan process.
– Use the parent or cosigner with the best credit score. Alternative loans interest rates are credit score driven. The better the rate the lower the payment.
– Apply to more than one alternative loan. You have 30 days, from the first loan application, to apply for as many loans as you can. I recommend three to five loans.
– Apply early. Everyone waits to the last moment to apply, so the volume goes up and you have to wait longer. If you apply in June, you should be all set by the end of the month, and can relax for the rest of the summer knowing your school will be paid for.
– Check your credit report and NSLDS to make sure you have the correct loans on file. Schools/lenders can make mistakes. It is in many ways up to you to make sure that no mistake was made. Also getting in the habit of checking your credit will not only help you improve your credit but also help you find any discrepancies earlier.
– Read the fine print!
– Take out more than you need. Loan refunds are helpful but remember you have to pay the loan back; so everything you buy with loan money has an additional cost due to interest being accrued on your loans.
– Go with a lender you have never heard of before. Ask a professional before applying to make sure it is a legitimate resource.
– Wait till the last minute to apply. If you are applying the week before school starts, be prepared to have to wait in lines and have some issues.
– Wait to pay back your student loans. If you can make payments earlier, you should.
– Drop out or fail classes. If you stop school you will start paying within six months. Taking loans out, paying them back and not having a degree is not recommended.
More tips from Thurgood Marshall Fund CEO Johnny Taylor
1. Consider going to community college for the first couple of years – the cost of a four-year degree can be reduced by spending the first two years at a community or junior college or attending college in the state.
2. Be clear on what you want to do when you enroll – college is not an exploration time of life; you dont go to college to find yourself. Dont change majors three times. That means you might not graduate for six to seven years.
3. Think of the consequences before you get a parent or grandparents to co-sign – dont put grandma in a retirement home at risk or leave your parents paying off debt. Understand what parents and grandparents are being subjected to.
4. Mobilize around education- Black lives matter. Black college students matter, 14,000 Black students no longer in school matters.
5. Talk about income disparity – we already know education is a great equalizer. Get literate about financial aid.