Parent PLUS Loans: A Popular Yet Burdensome Option for Low-Income Families

Rising College Costs and Law Changes Drive Low-Income Parents to Choose Parent PLUS Loans

Parent PLUS loans have become increasingly popular among low-income parents of color due to the rising costs of college and changes in the law. These loans provide a way for parents to fill the gap between federal grants and the full cost of attendance, especially at expensive private schools.

Kimara Shields, a Baltimore County resident, took out a parent PLUS loan to help her daughter, Ashante, attend college. Despite Ashante’s dreams of becoming a teacher, the aid she received only covered a fraction of the cost. Shields was left with no choice but to take on the debt herself. Ashante now faces $20,000 in undergraduate debt, while Shields is burdened with over $150,000 in parent PLUS debt.

As COVID-era loan payment pauses come to an end, parents like Shields are struggling to afford the high monthly loan payments. Many parents feel they had little guidance or information about the risks of parent PLUS loans when they first took them out. The lack of transparency from colleges and limited options for relief add to the difficulties faced by these borrowers.

The Impact on Black, Working-Class Families

Parent PLUS loans were originally designed for high-income parents who couldn’t afford to pay their children’s tuition upfront. However, due to the rising costs of college and limited financial aid, these loans have become a popular option among low-income parents of color. Black families, who earn about half of what white families do, increasingly rely on parent PLUS loans to provide their children with a chance at a better life.

For many Black parents, sending their children to college is seen as a pathway to economic mobility and a comfortable life. However, the limited information and guidance provided by colleges, as well as the emotional investment placed on the value of a college education, often lead to confusion and financial struggles for these families.

The Pitfalls of the Parent PLUS Loan Program

The parent PLUS loan program has been criticized for its lack of transparency and the burden it places on borrowers. The loans have no income requirements or borrowing limits, making them accessible to almost any parent who meets certain credit criteria. This lack of clear criteria and the expansive interpretation of credit standards has contributed to the growth of parent PLUS borrowing and the increasing costs of attending college.

Experts argue that the parent PLUS loan program has created a vicious cycle, where colleges promote the loans to increase their costs, making college seem more affordable on the surface. This leads to greater reliance on loans and a lack of understanding about the long-term impact of repaying the debt.

Efforts to Improve Transparency and Support for Borrowers

Recognizing the need for greater clarity and support for parent PLUS borrowers, colleges and organizations have launched initiatives to improve transparency in financial aid packages. These initiatives aim to provide clearer information about the distinct nature of parent PLUS loans and prohibit colleges from suggesting specific loan amounts to borrowers.

However, the challenges faced by parent PLUS borrowers go beyond the lack of information. The loans often come with high interest rates and limited options for repayment and loan forgiveness. Parent PLUS borrowers are not eligible for certain income-driven repayment plans or loan forgiveness programs, making it difficult for them to manage their debt in the long term.

The Struggles of Parent PLUS Borrowers

Parents who have taken on parent PLUS loans find themselves burdened with high monthly payments that they can’t afford. The emotional and financial sacrifices they made for their children’s education now feel overwhelming. Many borrowers express frustration with the lack of options for lowering their payments or receiving loan forgiveness.

Borrowers like Cindy Slattery find themselves struggling to make the high monthly loan payments on top of their other financial responsibilities. Despite their best intentions, these parents now face the burden of debt that they may never be able to repay. The lack of support and guidance from the government and loan servicers only adds to their frustration.

The Need for Reform and Relief

Parent PLUS borrowers, especially those from low-income backgrounds, are in need of reform and relief options. Currently, parent PLUS loans receive little attention in discussions about student loan forgiveness, and the system lacks the necessary support to address the challenges faced by these borrowers. Advocates are calling for inclusivity in programs like SAVE, a new income-driven repayment plan, to ensure that parent PLUS borrowers can benefit from relief measures.