House Votes to Postpone PLUS Auction
April 1, 2009
Earlier this week, the House of Representatives passed a "technical corrections" bill that would make several changes to the Higher Education Opportunity Act passed last year. Most of the changes are minor corrections, such as fixing typos or clarifying language, but the bill also includes two major fixes that would help borrowers if signed into law.
One of the corrections taken up in the bill was a move to postpone the controversial PLUS loan auction program by a year. Under the auction plan, lenders would bid to service PLUS loans in each state, a move that made much more sense when proposed in 2007 than when enacted in 2009. Bids for the auction were due this week, but so far it has generated little interest from most lenders and a statement from major lender Sallie Mae saying they had no plans to participate. Congress hasn't scrapped the plan entirely, but tabling it for a year will hopefully allow it to be revisited under more favorable, or at least different, conditions, and in the meantime will allow parents and graduate students to continue borrowing as normal.
The other much talked about provision would provide relief to people currently repaying their student loans who have defaulted in the past. The credit crunch has made it difficult for borrowers who are now making payments on time to move out of default and have their credit rehabbed and federal aid eligibility reinstated. Guarantee agencies have had trouble finding borrowers willing to buy up the rehabbed student loans and allow the default status to be removed from the borrowers' credit. A provision in the correction bill will allow the federal government to buy up rehabbed loans under the same authorization they're currently using to buy up other loans from student lenders.