Advocates push for greater cancellation of Parent PLUS loan debt

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Advocates are calling on President 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. Under Biden’s current loan forgiveness proposal Parent PLUS loans borrowers would be eligible have $10,000 in debt cancelled.
 
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.  The loans are a 
 
“Low-income Black and Latino families are most likely to suffer financially after taking on Parent PLUS debt,” wrote U.S. Sen. Chris Van Hollen, D-MD, who is leading a push in Congress 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. 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.

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.