PLUS Loans, Campus Debit Cards to Undergo New Scrutiny

NEW YORK (MainStreet) — New rules for Federal PLUS Loans, campus debit cards and state authorization for distance learning will be on the agenda when the Department of Education's Program Integrity and Improvement Rule Making Committee meets on February 19.

The committee will reconvene again over the next several months after the mid-February meet-up to examine key parts of the student loan ecosystem, from the colleges and universities that receive federal student aid to the companies that handle the disbursement of funds.

Among the 33 participants, who are described as the committee's negotiators, are David Swinton, president of Benedict College; Massachusetts assistant attorney general Jenny Wojewoda; Toby Merrill, director of the Project on Predatory Student Lending at The Legal Services Center at Harvard Law School; Paul Kundert, president and CEO at the University of Wisconsin Credit Union; Casey McGuane, chief operations officer at Higher One, an issuer of school-branded debit cards; and Carney McCullough, senior policy analyst at the Department of Education (ED).

A bone of contention will be whether to tighten underwriting standards for PLUS loans, which are co-signed by parents and have grown rapidly in recent years. Areas of disagreement are clearly defined. On one side will be some consumer groups and industry analysts who want increased requirements for eligibility. On the other will be historically black and for-profit colleges and their students and families, who rely on federal aid and will likely argue that any reduction in student loans will reduce access to higher education for underserved groups.

The regulation of distance learning will also be on the table. Elizabeth Sibolski, president of Middle States Commission on Higher Education and a member of the committee, told House Committee on Education and the Workforce last June that "[t]he evolution of higher education shows no signs of slowing, as evidenced by massive online open courses (MOOCs) which are driving new pathways and partnerships to a degree I have never seen in all my years in higher education."

The rule-making committee is expected to re-write the ED's state authorization rule for distance education. An existing ED rule, which mandated that colleges with distance learning programs operate from every state where they have students, was thrown out in 2012 by a federal court.

The panel will also attempt to draft rules for student debit cards and other financial products that have become fixtures on campus—and are used by schools and lenders to disburse federal loans and grants while fees are charge to students. Federal agencies, legislators and advocacy groups have called out the arrangements that some debit card providers have with colleges as being unfair to student customers.

Connecticut-based Higher One has been the leader in the school-branded debit card market for years. As the cards have proved to be profitable, other banks, including Sallie Mae, have brought similar products to market.

--Written by John Sandman for MainStreet

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