Years ago, I was strolling along a lakeside hiking trail in a Dallas-area park. As I was walking across a wooden bridge, I looked down to see a ball of wriggling snakes below me.
It was a big cluster--about the size of a beachball. It was a scary sight, and I didn't stick around long enough to determine whether the snakes were poisonous. I just hurried on my way.
The Department of Education's Parent PLUS program is like a big ball of snakes. The program has become so predatory, so large, and so politically charged that we don't want to even try to untangle it. We just want to hurry along without thinking about it.
Parent PLUS is a federal program that lends money to parents to help them pay for their children's education. Although Congress supposedly intended the program to help affluent families, six out of ten parent borrowers are from low-income households. And, as Matt Krupnick reported for Newsweek, at 140 schools, 80 percent of parent borrowers are in low-income homes.
Parent PLUS default rates are high. According to a Newsweek analysis, nearly ten percent of parents at 1000 colleges defaulted or were seriously late with payments within just two years of their child left college. At some schools, Parent PLUS default rates ran as high as 30 and even 40 percent.
And borrowing costs are high: "6.28 percent for the 2021-2022 academic year plus an upfront fee of 4.22 percent" (as reported by Newsweek).
In 2019-2020, parents took out Parent PLUS loans on behalf of three-quarters of a million students, and the loan amounts averaged about $16,000.
But the average Parent PLUS loan at some colleges is much larger. At Spelman College, an HBCU in Atlanta, the median Parent PLUS loan was $85,000 for parents whose children graduated or left school between 2017 and 2019.
Other schools with high Parent PLUS loan amounts include New York University (almost $67,000) and Loyola Marymount in Los Angeles ($60,000). The median loan amount is also high at several art and music schools: Berklee College of Music in Boston, Pratt Institute in Brooklyn, and Savannah College of Art and Design in Georgia.
Newsweek, the Wall Street Journal, and other news media have shown that some colleges are taking advantage of their students' parents by encouraging them to take out loans in addition to the federal loans and Pell grants that students receive on their own.
This is predatory behavior. And parents who take out Parent PLUS loans will find it is almost impossible to discharge these loans in bankruptcy.
Congress needs to shut down the Parent PLUS program. Or at the very least, Congress should amend the Bankruptcy Code to allow financially distressed parents to discharge these loans in bankruptcy.
But Congress will probably take no action. It sees the Parent PLUS program as a big ball of snakes, and no politician has the guts to close down this pernicious scam against low-income parents.
|The Parent PLUS program is a ball of snakes.