Efforts to Cope with Federal PLUS Loan Restrictions. The Case of Jarvis Christian College

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1 Efforts to Cope with Federal PLUS Loan Restrictions The Case of Jarvis Christian College

2 PLUS Loan Basics For many years PLUS loans have been an important resource for parents with limited savings for a child s higher education expenses. The loans filled the gap between the student s financial aid and the cost of attendance. Changes made in 2011 and implemented in fall 2012 had a negative impact on private colleges and institutions serving minority and first generation students. These changes exasperated the financial position of many families as they struggled for relief from the economic downturn of the prior years.

3 Information on PLUS Loans Commitment by parent of dependent undergraduate student Eligibility based on absence of adverse credit history Can cover cost of attendance less financial aid Available to institutions with Direct Loan program Repayment due 6 months after the student graduates or below half time.

4 Changes in 2011 Changes were made to the administration of PLUS loans in 2011 and implemented in Fall 2012 without discussion with schools, leaving institutions without an opportunity to prepare for the changes. There was no notification prior to implementation of the changes. These changes had a profound impact on access to higher education. Tightened standards on review of credit history The U.S. Department of Education now stipulated that charge off accounts and accounts in collections within the last five years previously 90 days makes applicants ineligible to be approved for PLUS loans.

5 Denial of Loans Applicants were denied parent plus loans for adverse credit consisting of any of the following: Bankruptcy discharge within the past five years Voluntary surrender of personal property to avoid repossession within the last five years Collateral repossession within the past five years

6 Denial of Loans con t Foreclosure proceedings started Foreclosure within the last five years Conveying your real property that is subject to a mortgage (by deed) to your lender to avoid foreclosure (deed in lieu of foreclosure)

7 Denial of Loans con t Accounts currently 90 days or more delinquent Unpaid collection accounts Charge offs/write offs of federal student loans Wage garnishment within the last five years

8 Denial of Loans con t Defaulting on a loan, even if the claim has been paid Lease or contract terminated by default County/state/federal tax lien within the past five years

9 Impact on institutions and students Many colleges, especially HBCUs, experienced significant loss of enrollment. In Fall 2012, almost 15,000 students at HBCUs learned that the U.S. Department of Education had rejected applications from the students parents or guardians for loans to help pay college expenses. HBCUs lost an estimated $168 million in revenues as a result of the large number of students who were not able to start or continue their college education.

10 Impact on institutions and students con t 57,542 applicants at HBCUs in , 68% were denied a PLUS loan. Only 10% of initial denials were reconsidered an approved. Many schools experienced financial challenges from loss in revenue, including the need to carry large AR balances, elimination of nonessential programs such as athletics, and furlough of employees. Late introduction of the reapplication and reconsideration processes left many students unable to finance their education, which resulted in many of them having to leave school.

11 Jarvis Christian College Situation

12 Issues of Accreditation and Finance In December 2011 Jarvis Christian College was placed on Warning by the Southern Association of Colleges and Schools Commission on Colleges. The sanction was advanced to Probation in December The College experienced declining enrollment for the two years prior to The declining enrollment resulted in negative cash flow for the College during those years.

13 Enrollment Headcount in Fall 2011 reached the low point of 511 students; 394 students were enrolled in Spring Spring 2012 semester ended with 300 or fewer students completing the term. Under a change of administration beginning in April 2012, Jarvis Christian College began a trend of yearly increases in enrollment headcount.

14 The Impact of the Changes to Parent Plus Loans Impact of the Changes of the Parent Plus Loan

15 Number of Approved PLUS Loans Fall 2011 Fall 2012 Fall 2013 Fall 2014

16 Although changes in PLUS Loans had an impact on the number of Jarvis parents securing loans, efforts to increase enrollment and improve revenue changed the profile of the Jarvis student: Higher GPA JCC Plus Loans More families had an ability to support a college education More students participated in athletics and performing arts Increase in diversity in student body

17 Adjusting the Cost of Attendance In 2012 the Jarvis Christian College Board of Trustees approved a 15% reduction in tuition, fees, and other costs. Several increases in prior years placed the institution at a competitive disadvantage with comparable colleges. The increase in college costs resulted in increased AR balances. Enrollment had declined in prior years.

18 Funding the Cost of Attendance Annual Cost of Attendance at Jarvis Christian College, Tuition $10, Technology Fee $ Student Activity Fee $ Room $ 4, Board $ 3, Board Tax $ TOTAL $19,552.36

19 Scenario 1: Jarvis student Texas resident, full PELL, full TEG student, on campus, full loan (with denial of PPL) A/R Balance = $ (0) 1st year Loan = $9,500 Loan Total (4 years) = $40,000 ($18,000 unsubsidized) Scenario 2: Jarvis student non Texas resident, full PELL, on campus (with denial of PPL) A/R Balance = $(3,200); 4years $12,800) 1st year Loan = $9,500 Loan Total (4 years) = $40,000 ($18,000 unsubsidized)

20 Discounting Tuition and Fees Successful actions included: Institutional Scholarships are awarded to students for merit based on high school GPA. Expansion of athletic teams based on a financial model that included student scholarships. Maintaining a discount rate of 20% or less of revenue.

21 Increasing Enrollment through Discounting Athletics In Fall 2012 Jarvis reinstated Baseball to add to Men s and Women s Basketball and Women s Volleyball. In Track and Field and Cross Country programs were expanded. With the Fall 2014 semester Men s and Women s Soccer, Men s Golf, and Women s Softball programs were begun..

22 Increasing Enrollment through Discounting con t Performing Arts Scholarships offered to expand the Jarvis Choir Recruitment to start a Band. Academic Scholarships were increased in Recruiting efforts resulted in a different student profile

23 Private Support Fund for the Future JCC heightened its efforts to seek financial support from alumni and friends by launching the Fund for the Future in Spring Management of Funded Scholarships The scholarship endowment was analyzed resulting in a change in management and a release of funding for student support. The institution now draws a annual percentage of endowment funds to support operations, rather than a fixed amount. Individual donations to support students Large gift from a donor to help bridge the gap in student support.

24 Jarvis Renaissance Program In Spring 2014, Jarvis Christian College launched a flexible learning program for working adult students. In the Fall 2014 semester, over 70 students were enrolled in JRP classes.

25 Superintendent s Forum College invited local Superintendents representing 19 school districts to a lunch meeting in Spring Local school systems were offered scholarships for which they could recommend students. Many local students commuted from home to ease expenses.

26 Impact on Institution Although the changes in PLUS loans have had an impact in the ability of students to pay the cost of attending Jarvis Christian College, the institution took advantage of its particular situation to expand its enrollment. Keeping students in school, however, required maintaining larger AR balances. Additionally, funding from UNCF and other private sources helped students continue their education. Improvements in college operations led to successful resolution of accrediting issues and a successful SACSCOC review for decennial reaffirmation of regional accreditation in 2014.

27 Strategies for Moving Forward

28 New Regulations 2014 Effective July 1, 2015, applicants with adverse credit history will be approved on the basis of extenuating circumstances or a qualifying co signer will be required to receive loan counseling prior to receiving the loan disbursement. Among other changes to the rule: Borrower eligibility criteria will state more clearly that the PLUS loan adverse credit history requirements apply to student, as well as parent, PLUS loan borrowers. Definitions of Charged off and in collection will be clarified as pertaining to the loan approval requirements.

29 New Regulations 2014 con t Define adverse credit history as including one or more debts with a total combined outstanding balance greater than $2,085 that are 90 or more days delinquentasofthedateofthecreditreport,orthathavebeenplacedin collection or charged off during the two years preceding the date of the credit report. Increasing the combined outstanding balance threshold of $2,085 over time based on the rate of inflation, as measured by the Consumer Price Index for All Urban Consumers (CPI U). Revising the types of acceptable documentation for extenuating circumstances.

30 Projected New Loan Approval Although it is estimated that over 327,000 parents will be eligible for PLUS loans under the new regulations, however, there are questions that still must be addressed.

31 Ongoing Concerns Questions: Will the change from a credit review of 5 years to 2 years result in a return to previous levels of support? How will loan counseling for parents be handled? What is the role of the institution in working with parents?

32 Assistance Provided to Parents and Students Loan counseling can become a component of New Student Orientation; information can be provided to parents upon admission. If more parents are not eligible, students may be forced to borrow the maximum loan amounts throughout their four years in college creating a greater debt burden on students upon graduation. Students may be forced to borrow through private placement institutions at higher rates again creating larger and more costly debt burden on students. Greater efforts must be put forth to attract outside scholar dollars.

33 Unfinished Business The increased interest rate is a burden on parents. Colleges must advocate for interest reduction. Other family members seeking access to higher education will increase the burden on parents. Parents should receive relief from the economic downturn much like banks and businesses. Loan forgiveness for teachers should also apply to PLUS loans. Colleges should have more input into rulemaking and receive advanced notification of any changes in policies, rules and/or regulations.