Did you know that a “credit freeze” may delay Federal Direct PLUS Loan approvals? The U.S. Department of Education’s (ED) Federal Student Aid Office has informed the financial aid community that some applicants for a Federal Direct PLUS Loan may experience a challenge in the process. Applicants for a Federal Direct PLUS Loan (parent PLUS Loan, or graduate/professional PLUS Loan), or an endorser for a PLUS Loan, that have elected to place a “credit freeze” on their credit profile may not be able to fully complete the process. ED’s alert to the situation was published on October 13, 2017, in its weekly COD Processing Update. The full text of the information provided is copied below for your convenience:
Credit Check Processing for Borrowers who have requested a “Credit Freeze” (10/13/17)
As a result of recent data breach events and heightened security concerns, many consumers are understandably taking steps to protect their personally identifiable information (PII). One of those steps may be placing a “credit freeze” on their credit profile at one or more of the credit bureaus, which prevents further credit activity from occurring without additional consent. Because a credit check is part of the process when a borrower or endorser completes a Direct PLUS Loan Request or an Endorser Addendum on the StudentLoans.gov website, borrowers or endorsers with an active credit freeze may not be able to fully complete either process and may receive an error message when the credit check is run. The borrower or endorser must remove the credit freeze first; this action cannot be done by the school or Federal Student Aid. Note: Federal Student Aid can process an inquiry at two of the three main credit bureaus (currently Equifax and TransUnion). If a borrower or endorser places a credit freeze at only one credit bureau, Federal Student Aid could still receive a credit determination based on information provided by the secondary credit bureau. Federal Student Aid is working to include additional messaging on the StudentLoans.gov website to inform borrowers and endorsers that those who have a credit freeze on their credit profile will need to remove it before completing a Direct PLUS Loan Request or the Endorser Addendum. Federal Student Aid encourages schools working with borrowers and endorsers who may receive an error during the credit check process to ask about a credit freeze as a possible cause for the error. Schools using the “Quick Credit Check” on the COD Web Site could experience an error or “timeout” response as a result of a borrower’s credit freeze. In some cases, Federal Student Aid will not be able to return a credit check response with the origination record and will reject the record with COD Reject Edit 996 (Invalid Value). Again, when troubleshooting a credit issue with a borrower or endorser, schools may want to see if the credit freeze situation may apply. If you have additional questions about credit check processing, contact the COD School Relations Center.
It is important to note that applicants who placed a “freeze” on their credit profile will need to check with the individual credit bureaus to determine the best way to proceed as each credit bureau may have differing criteria and policies for locking and/or freezing an individual’s credit profile, and subsequently unlocking it or unfreezing it. Further, each state has differing laws related to whether a fee may be charged for freezing or lifting or removing a credit profile “freeze.” Check with the individual credit bureaus for more information or the COD School Relations Center for more information. The three main credit bureaus’ Web sites are:
Equifax
https://www.equifax.com
Experian
https://www.experian.com
TransUnion
https://www.transunion.com
NOTE: FAME does not endorse or vouch for any credit bureau’s services or product offerings.
Direct Loan Origination Fees Changed October 1, 2017
Also, as a reminder, the Federal Direct Loan origination fees changed on October 1, 2017. You may refer to ED’s June 19, 2017, Electronic Announcement for the details, or the FAME Regulatory Bulletin for June 30, 2017, for more details.
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This material is presented for informational and educational purposes only and should not be considered to be giving legal advice.
