The Department of Education announced yesterday that it is canceling the pilot auction program for parent PLUS loans because of a lack of interest to participate by lenders.
"During the 2009-10 and 2010-11 award years, parent PLUS loans under the Federal Family Education Loan program may be made by any eligible lender to parents of students attending eligible educational institutions in any State," according to a statement from the Department.
NASFAA has been advocating the Department and education leaders in Congress to delay implementation of the Competitive Loan Auction Pilot Program for parent PLUS loans because the current economic conditions could cause disruptions in the parent PLUS loan program.
In December 2008, NASFAA wrote then-Secretary of Education Margaret Spellings a letter asking her to use the Secretary's authority to postpone the auction. On February 2, a Department official responded in a letter stating that the Department lacked the authority to postpone the program.
While the Department lacked the authority to delay the program, the lack of a sufficient number of lenders willing to participate in the pilot auction program forced the Department to cancel the program.
"In order for the auction to have been considered successful for any State, at least two lenders must have submitted pre-qualification requests for that State," the Department noted in a statement. "However, the Department failed to receive two requests for pre-qualification for any State, and for the vast majority of States the Department received no requests at all. For this reason, the Department considers the purpose of the Competitive Loan Auction Pilot Program to have been frustrated, and it is canceling the auction that was scheduled to occur on April 15, 2009."
NASFAA has also been urging lawmakers in Congress to delay the auction. In letters to Education and Labor Committee Chairman George Miller (D-CA), the committee's Ranking Republican Howard "Buck" McKeon (R-CA), Senate HELP Committee Chairman Edward Kennedy (D-MA), and the committee's Ranking Republican Mike Enzi (R-WY), NASFAA President and CEO Philip Day notes that "while innovation and experimentation can be desirable methods of testing loan subsidization alternatives, current market conditions and the relatively short time until the pilot's scheduled launch date on July 1, 2009, warrant more analysis to avoid unintended consequences."
Congress responded when the House passed legislation (H.R. 1777) on March 30 to suspend the Parent PLUS Loan auction. The bill, which makes technical corrections to the Higher Education and Opportunity Act (HEOA), is expected to be passed by the Senate later this month.
Media Coverage
U.S. Cancels Auction for Parent Loans Inside Higher Ed
Education Dept. Cancels PLUS Loan Auction The Chronicle of Higher Education
Posted 04/10/09 to www.NASFAA.org. Redistribution to non-NASFAA institutions is prohibited. Please submit Web site questions or comments to Web@NASFAA.org.
