Easing credit for parents seeking educational loans?
In a May 27 article for Bloomberg, Janet Lorin describes, "Alarm Raised by Plan to Ease Credit Norms on U.S. Parent Loans." The new plan to extend loans to a greater pool of parent applicants is drawing criticism from consumer advocates who say loosening the credit standards will "only hurt borrowers, and default rates, already on the rise, will continue to climb," writes Lorin.
Making the loans more accessible to parents with problematic credit histories is just one aspect of the plan under scrutiny; the other is the loan deferral period. When parent loans were first extended, parents began to make payments immediately; now, parents only begin to repay their loans six months after their children have graduated.
"The idea that you wouldn't have to pay anything for years might make it more likely you don't pay attention to what the bottom line says," Professor Susan Dynarski told Bloomberg. "I don't understand the logic behind deferral on a [parent] PLUS loan."
Susan Dynarski is a professor of public policy at the Gerald R. Ford School of Public Policy, and a professor of education at the University of Michigan's School of Education. She is co-founder of the Education Policy Initiative, which engages in applied, policy-relevant education research designed to improve overall educational achievement and outcomes.