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The Department of Education is loosening borrower qualifications for Federal PLUS Loans, which allow graduate students and parents of dependent college students to finance higher education. The updates, published Oct. 23, include a new definition of “adverse credit history,” potentially opening access to federal student loans for millions of families. The changes go into effect July 1, 2015.

Consumers receiving PLUS Loans cannot have an “adverse credit history,” and there are about a dozen things that meet the Department of Education’s definition of “adverse credit history.” That definition hasn’t been updated in 20 years, meaning it doesn’t take into account the past several years of economic tumult and its impact on American consumers. Under the current requirements, PLUS Loan recipients cannot have unpaid collections or charge-offs on their credit reports within the past five years, and borrowers are ineligible for PLUS Loans if they have any accounts delinquent for 90 or more days.

The Big Changes

Delinquency: Borrowers with less than $2,085 (adjusted to the Consumer Price Index) of outstanding debt 90 or more days past due may qualify for PLUS Loans. Currently, any account more than 90 days delinquent was considered an adverse credit history.

Length of history: Debts in collection or charged off in the past two years will qualify as adverse credit history. The current requirement is five years.

Definitions: The Education Department will revise definitions of debt that has been charged off or is in collection, “to more accurately determine whether an applicant has an adverse credit history,” according to the announcement posted to the department’s website.

Required loan counseling: Borrowers with an adverse credit history may now be able qualify for PLUS Loans if they can demonstrate extenuating circumstances. If they qualify under that provision, they’re required to undergo loan counseling before receiving the loan. Though it’s not required for everyone, loan counseling will be available to all PLUS Loan borrowers.

Before taking out PLUS Loans, you should check your credit, because it’s possible you could qualify for better rates through a private lender. You can get two of your credit scores for free through Credit.com and check for updates each month. Keep in mind that federal student loans tend to be more flexible, are sometimes eligible for forgiveness and carry fixed interest rates, but that doesn’t mean you shouldn’t explore your options. A few percentage points could make a massive difference in how much your debt costs you over your lifetime, this calculator shows.

No matter your lender, you need to understand the weight of your decision to finance an education. Student loans generally cannot be discharged in bankruptcy, and falling behind on payments can wreck your credit scores, rack up a lot of fees and possibly lead to a point where the government can garnish your wages. Plenty of people responsibly finance their educations, but it’s crucial to plan ahead to make sure you can afford your loans.

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