Parent PLUS Loans Are A Dubious Higher-Ed Option, Study Finds

Career College Central summary:

  • Low-income parents scrambling to help their kids pay for college may be lured into taking on loans they can’t really repay, say some prominent education scholars. This comes at a time when the Department of Education tries to iron out kinks in its eligibility requirements for the Parent PLUS loan program, which allows parents to borrow up to the total cost of sending their kids to college for four years, regardless of their ability to repay.
  • PLUS loans require a check for red flags in recent credit history, but they do not even allow, much less require, any scrutiny of a family’s debt to income ratio. In 2011, the Department of Education tightened scrutiny of flawed credit, expressing fears that parents would be overburdened with debt beyond capacity to repay. This provoked a backlash from schools and some parents, and sparked an ongoing debate as to how rigorous the credit check should be.
  • But even with the tighter access rules, critics argue, many families could be taking on debt that is mathematically unsustainable — even when the family has no recent blemishes on its credit record. Because the parent loans are buried in the fine print of a college financing offer, many parents end up acquiring debt they cannot afford, argues Awilda Rodriguez, a fellow at the American Enterprise Institute, in a recent analysis on the Parent PLUS loan system. Since the publication of her paper, Rodriquez says she has received multiple emails by parents who are now in a financial bind, struggling to repay loans they can’t afford.

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