There is $62 billion in outstanding debt belonging to parents who’ve borrowed federal Parent PLUS loans to send their kids to school. The Department of Education is considering tightening the loans’ eligibility criteria, amid concern it’s been too easy for low- and moderate-income parents to get in over their heads.
But the last time it did that, it set off a firestorm.
The thing about Parent PLUS loans is they’re not based on income. Pass a credit check, and you can borrow up to the full cost of attendance. Parents don’t have to prove they can actually repay their loans.
“At the time, I was happy to get it,” says 56 year old Barbara Jones of Boston, who took out more than $100,000 in loans she now says she can’t afford.
“Because then if you didn’t get that, then what would you do?” she asks. “You know, how would you keep your child in school, how would you pay it if you didn’t have any other option than the Parent PLUS loan?”
Jones’s son graduated from Pace University last year. Now mother and son are both in debt for the same degree.
Of course, millions of parents take out PLUS loans; they’re a tool to promote college access. The average outstanding balance is $20,338, according to the Department of Education.
But policy analyst Rachel Fishman with the New America Foundation worries it’s too easy for low and moderate income families to borrow too much, as they try to give their kids a better life.
“That really puts the federal government in a dangerous position of telling them, ‘Sure you can do that,’” she says. “'You can mortgage your future. You’re really close to retirement and we can garnish your Social Security, but fine, we’re gonna to let you take on a loan for $20,000, $30,000 dollars.’”
“We absolutely don’t want parents to get in over their head,” says Cheryl Smith, who works with the United Negro College Fund. “That’s why we think there should be a counseling program. At the same time, we don’t think we should be paternalistic.”
UNCF helps minority students get to and through college. It also lobbies for the private historically black colleges and universities. HBCUs have a lot of low and moderate income students, and Smith says thousands were affected when the government toughened the credit check for Parent PLUS loans back in 2011. She says enrollment fell at some private HBCUs , and HBCUs generally lost millions in revenue, “Directly attributable to fewer students being able to get a Parent PLUS loan.”
Even though parents still don’t have to prove they can repay their PLUS loans, Smith says it’s now too hard to get one.
Still, the larger community is conflicted. Johnny Taylor heads the Thurgood Marshall College Fund, which represents the publicly supported HBCUs. He thinks, at a certain point, Parent PLUS loans should be capped.
“Heretofore we have said to students, ‘Pick the school that you want to attend.’ And frankly the narrative may change to pick the school that you can afford to attend,” he says.
It’s a narrative unfolding within the Department of Education too, which is considering changes to the rules this spring.
By Shea Huffman/Marketplace