‘An Unfair Burden’
Parent PLUS — a federal program that helps parents borrow money for their children’s college education — has recently come under scrutiny. The loans have higher interest rates and origination fees than do other federal student loans for undergraduates, fewer options to reduce payments or seek loan forgiveness, and almost no safeguards to ensure that borrowers can repay their loans. But for some low-income families seeking to help their children through college, there are few alternatives.
Parent PLUS borrowers who meet the income criteria are among those who will be eligible to have up to $10,000 in student loans canceled under President Biden’s unprecedented forgiveness program. But now, some advocates are calling on Biden to cancel up to $20,000 in debt for Parent PLUS borrowers whose children received Pell Grants, citing the disparate racial impact of the loans.
Low-income Black and Latino families are most likely to suffer financially after taking on Parent PLUS debt, wrote Sen. Chris Van Hollen of Maryland, who is leading a push among Senate Democrats to expand debt relief for parents, in a recent letter to Biden.
Congress created the Parent PLUS loan program in 1980 with the intent of helping middle- and upper-income families looking for more liquidity to pay for college. But as the cost of college has grown in the decades since then, the program has turned into a very different animal, with many low-income families relying on it to fill the gap when other student aid doesn’t cover the full cost of attendance. Today, more than 3.7 million families owe more than $104 billion in Parent PLUS loans, according to the Century Foundation, with the heaviest burden falling on Black families.
According to the Georgetown University law school’s Center on Poverty and Inequality, parents of students of color from very low-income backgrounds made up a growing share of Parent PLUS borrowers from 2008 to 2018, with the sharpest rate of increase among families of Black students.
“Higher education costs a lot of money,” said Lodriguez Murray, senior vice president for public policy and government affairs at UNCF, which supports historically Black colleges and provides scholarships to Black students. “When you don’t have the money, you still have the dream. So how do you make it happen? Oftentimes, underrepresented students feel like the only way to advance that goal is through borrowing when they’ve exhausted all other steps.”
Murray said that while the Parent PLUS program has provided a lifeblood, allowing some students to gain access to higher education, it has also saddled families with long-term payments.
Peter Granville, a senior policy associate at the Century Foundation, published a report in May assessing the effects of the Parent PLUS program. Among the key findings:
- Many parents struggle to repay Parent PLUS loans, with a median loan amount of about $29,600. Many parents spend more time repaying the loans than they spend living with the child the loan benefits.
- Ten years after starting repayment, Parent PLUS borrowers whose children attended colleges with the highest percentages of Black enrollment owed an average of 96 percent of their principal, compared with 47 percent for those whose children attended colleges with the highest percentages of white enrollment.
- Thirty-three percent of Black parents and 29 percent of Latino parents borrowing for their children’s education also have outstanding loans for their own education, compared with 13 percent of white parents.
- Forty-two percent of Black parents who took out Parent PLUS loans in 2018 had so little wealth or income that their expected family contribution to college was zero. For Latino borrowers in the program, that proportion was 25 percent.
The federal government uses families’ income, assets, and benefits to determine how much they should contribute toward their student’s college expenses, known as an expected family contribution. Colleges use that figure to determine federal aid eligibility and a financial-aid award, but sometimes students don’t receive enough aid to cover the full cost of college, prompting families to turn to loans. Tiara Moultrie, a fellow at the Century Foundation, said that for borrowers whose expected family contribution to college was zero, “this is a government determination that they are so low-income, they shouldn’t have needed to pay anything for college. Yet we still have students and parents borrowing in order to give them access to the thing that they really want to give them access to — not only a college education, but the kind of social and economic mobility that we think comes with those degrees,” and the ability to pursue their intellectual curiosity.
Rachel Fishman, acting director of research for higher education at New America, a research organization, said the federal government is effectively acting as an exploitative subprime lender by failing to determine whether families have the ability to repay loans, even when its student-aid forms show that their income and assets are so low that they should not have to pay anything toward college.
Yet when the federal government tightened up lending standards for Parent PLUS in 2011, Black students and HBCUs were left scrambling, with students struggling to pay their bills and colleges finding themselves short of tuition. Under pressure from political leaders and Black colleges, the Education Department relaxed its standards.
Fishman said that until the underlying issue of college affordability is addressed, loans are “going to continue to harm our most marginalized and vulnerable students [and] chip away at any achievement being made at the racial wealth gap.”
“It’s an unfair burden,” Fishman said, “to ask of these families.”
