PLUS Loans are not Grants

Last week, during the U.S. Department of Education’s Program Integrity negotiated rulemaking, UNCF released a policy report--The Parent PLUS Loan Crisis: An Urgent Crisis Facing Students at the Nation’s HBCUs--about the effect of the change in the credit check criteria for Parent PLUS loans. In this report, PLUS loans are treated almost as if they are the same as other federal student aid options. Parent PLUS loans, however, are not like other forms of federal student aid and any conversation that tries to lump PLUS loans in the same category is deceptive.

What makes Parent PLUS loans different than other federal student aid? Parents have to undergo a credit check in order to take the loan. Parents are the ones on the hook for paying the loan back. And since a parent’s income remains relatively unchanged by the loan, the loan isn’t eligible for Income-Based Repayment. If a parent is already in a vulnerable financial situation this loan ensures that the institution is paid on time, but can leave the parent worse off once his or her bill comes due.

Below are student vignettes from UNCF’s report. In these vignettes, Parent PLUS loans are being discussed almost like they are Pell Grants or Stafford loans. Or really they’re being discussed by institutions exactly as they perceive them: As a grant for them on the front end, with parents facing all of the consequences on the back end.

Kristina, a senior English major at Claflin University, needed a $10,770 Parent PLUS Loan to finish her senior year; her request was denied. Her single father is doing his best, but he has only a high school education and seven other children to support. Like so many HBCU students, Kristina is looking toward a career of service after graduation, as an officer in the U.S. Air Force.

Florida Memorial University senior Shaconna is a communications major whose goal in life “is to be a person of positive change, a person who displays good character, assists and serves her community and [is] a great leader.” But her future was jeopardized by the denial of the application of her mother, a minister with five other children, for an $8,530 Parent PLUS Loan. A good student with a 3.3 GPA, in the words of her college’s financial aid office, “Shaconna desires an education that her family just cannot afford.”

Montolliea, a sophomore at Philander Smith College plans to become a middle school teacher. As a high-achieving high school student in West Memphis, Ark., she knew she would need a college degree to live the life she wanted. Her single mother did her part, going back to school so she could become a registered nurse, “to make sure,” in Montolliea’s words, “that my two brothers and I would never have to go without.” But the Education’s Department’s denial of her mother’s application for an $11,195 Parent PLUS Loan threw the aspirations of Montolliea and her mother into doubt, leaving her “unsure about how I’m going to afford to pay for school.”

The lives and educational aspirations of Brittany and Whitney, twins from New Orleans were set back by Hurricane Katrina. Their family lost everything and had to relocate to Tuscaloosa, Ala.  After successfully completing a year of community college in Louisiana, they were thrilled to discover that they were accepted at Stillman College.  The twins would finally have the college experience they desired at Stillman and begin making their dreams of becoming child psychologists a reality.  But the denial of their mother’s application for an $8,000 Parent PLUS Loan set back their plans. To make up for the denied funds, Brittany and Whitney were forced to return to New Orleans and attend community college there.

For Olivia, a junior at Virginia Union University majoring in communications, college has been a great experience. “I have encountered many professors and faculty that I have grown close to over the years,” she writes. “Anytime I have a problem or question their doors are always open to me which is very comforting.” But financial difficulties stemming from a divorce have strained the family budget, a situation exacerbated by the Education Department’s denial of her mother’s application for an $8,487 Parent PLUS Loan. Because she couldn’t pay the $1,000 deposit to live on campus, Olivia had to move out of her dorm to live at home, and commute to school from home on buses that provided only limited service. More recently, after the university stepped in to provide additional scholarship assistance, Olivia has been able to move back on campus.

These vignettes are meant to tug on your heartstrings, and they very effectively do so. But remember PLUS loans are usually borrowed by parents only after a student has already received and exhausted all other aid options including federal, state, and institutional grants and loans. Is it really good policy for the government and schools to expect a single dad with only a high school education and seven other children to support to be able to pay back what could easily expand to a six-figure debt?

What comes across overwhelmingly in these vignettes is the need for college “affordability.” But loans don’t make college more “affordable,” they enable access to finance college as costs keep rising. Now institutions are saying that Pell Grants aren’t enough, and that student loans aren’t enough, but they need parent loans too (preferably with no cap, almost no restrictions, and no accountability). That’s not college access, that’s institutional self-interest. Parent PLUS loans don’t really make an institution more affordable for a family. The price set by the institution, board, or state is what makes it more affordable. Institutional overreliance on PLUS loans must end. We need better solutions for students and families.

Edited 4/9/14 to clarify that PLUS loans are taken out usually only after a student has exhausted their other loan options. Parents can borrow PLUS loans before a student borrows Stafford or Perkins, but because of the lower rates on Stafford and Perkins loans, students are usually recommended to exhaust those options before turning to PLUS."