➡️ High default rates. Mega-sized loans. No relief in sight. A Newsweek analysis of new parent-loan data shows college debt is a big problem for moms and dads too.
PAUL J. RICHARDS/AFP/Gettyanalysis found. Default rates at these institutions, where three-quarters of the borrowers were typically from low-income households, ran double the national average—a particularly bad bargain for the parents shelling out this money given the historically low graduation rates at many of these schools.
In testimony about parent loans at a U.S. Department of Education hearing last month, Mayotte said:"In any other forum, the practice of awarding loans in large amounts without regard to the borrower's ability to pay, while not providing tools for relief, would be considered predatory and unconscionable." Talking with, she put it this way:"The Parent PLUS program is fraught with peril—for families and for the U.S. taxpayer.
That's the case for Phil Bender, a former public- school superintendent in Venice, Florida. When the oldest of his three daughters enrolled at Indiana's Butler University in 2014, the family was able to pay for the first year from savings. But when a college financial aid officer floated the idea of Parent PLUS loans, they seemed like the right call in subsequent years, Bender says.
"The result is that some parents are on the hook for debt most lenders never would have granted in the first place," says Sandy Baum, a senior fellow at the Urban Institute's Center on Education Data and Policy and author of Student Debt: Rhetoric and Realities of Higher Education Financing.has data, 58 percent of parent loans went to lower-income households; at for-profit schools, the figure jumped to 75 percent.
The federal government did make one attempt to tighten PLUS loan criteria a decade ago but the effort did not go well. The reforms led to a spike in loan denials, and some schools that relied heavily on parent borrowing, including many HBCUs, argued they were being unfairly targeted. The resulting backlash led to an apology from then-Education Secretary Arne Duncan and a loosening of the rules again in 2014.
It's a Catch-22, say researchers who have studied the impact of PLUS loans on lower-income households and Black families. Looser credit standards improve college access for parents with limited financial resources but leave them with debts they struggle to pay. One out of every five PLUS borrowers and more than a third of Black borrowers have incomes below the federal poverty line, according to Baum.
"For the institutions, Parent PLUS loans are like a grant. They get the money regardless of what it does to the family." It's a tricky conundrum for colleges and universities, many of which depend on maintaining steady enrollment for their survival. Smaller private colleges in particular depend on tuition, so losing Parent PLUS loans as a financing option could have dire consequences, they say.
The amounts they owe are usually much larger too, since they can borrow up to the full cost of attendance each year and may take out loans for multiple children.
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