Six-figure parent loans: When college dreams for students mean nightmarish debt for family

ATLANTA – While Aaron Greene was packing to head back to Clark Atlanta University for his junior year, he stumbled upon a college bill at his mother’s house in Stone Mountain, Georgia. The number was so large that he figured it had to be a phone number.

“I know my mother is not paying this much money for school,” he said. “We don’t have that.”

Though his mother, Di-Anne, already had $40,000 in student loans from her own graduate school education, she has taken out $42,000 in Parent PLUS Loans for Aaron – and she had kept him in the dark about the cost.

“I didn’t want to give him the pressure of starting out in college, worrying about grades as well as the finances,” she said. “But I probably should have (told him) so that he could get a better understanding of the sacrifice that’s been made.”

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Parent borrowing is a sacrifice many black parents make to pay for their children’s college education, and it is especially prevalent among families whose children attend historically black colleges and universities. The federal government’s Parent PLUS program helps make attending college a reality, closing the gap between the cost of college and what the student receives in grants and other loans.

Though it may sound like a lifeline, the Parent PLUS Loan program can cause economic complications for families.

Six-figure debts

The loan program was introduced in the 1980s as a way for middle- and upper-income parents to help their children pay for college while keeping their assets liquid. It has since become more popular among lower-income parents. That's possible because the program does not check the ability to repay, considering only the borrower's credit history.

When parents borrow, the debt can weigh down families for generations. But the burden falls particularly hard on low-income black families.

Few white families with low incomes take out the loan – just 10% of white Parent PLUS borrowers earn $30,000 or less. Comparatively, 40% of black Parent PLUS borrowers have incomes that low.

Atlanta colleges illustrate this dichotomy of borrowing.

Parents of students at three of the city’s historically black colleges – Clark Atlanta University, Morehouse College and Spelman College – combined took out more than $102 million in Parent PLUS Loans in 2018. Meanwhile, parents of students at majority-white Emory University – which has nearly the same number of students as those three historically black colleges and universities together – borrowed only $7 million in Parent PLUS Loans that year.

Parents borrowing for their children’s education isn’t new. The program has existed long enough for families to see one of the consequences of taking out large loans: generations of overlapping debt.

In Texas, Prairie View A&M University graduate Tania White needed her mother to take out Parent PLUS Loans for her undergraduate education 30 years ago. White’s mother borrowed $12,000 for White’s three years of college. She is still paying it back. Since White’s graduation in 1992, her mother’s debt has accrued to more than $100,000. White said the interest rate on Evans’ $100,000 debt is about 9%.

“You know how something is so outrageous where you have no expression or feeling behind it? That’s where we are with that,” White said, remarking that paying back student debt has become a routine for her family.

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Despite seeing her mother’s debt accumulate, White resorted to Parent PLUS Loans to pay for her daughter’s trip to study abroad. White now owes more than $200,000 between her own and her children’s student debt.

This generational pattern of borrowing is not uncommon, since the Parent PLUS program casts debt across all generations – not just young people affected by federal student loans.

“We wanted to be the group that breaks generational poverty,” said Joy Evans, mother of a Paul Quinn College graduate, referring to her family’s three generations of college loan borrowing.

Hoping the kids will help

Intergenerational student debt may be a product of the length of time it takes families to repay the hefty loans. Parent PLUS Loans often take five to 20 years to repay because many of the borrowers are approaching retirement age, leaving less opportunity for promotions or time for them to accumulate enough money.

As a result, some parents said they hope their children will help pay off the PLUS Loans after they graduate. For instance, one father took out Parent PLUS Loans for his youngest daughter to attend Coppin State University in Baltimore.

“I’m concerned and a little worried about the debt,” said Perry Collins. But “it is our hope that (our children) will get to the point where they can provide for themselves.”

Collins said his debt is accumulating quickly between a mortgage and his children’s student loans. He hopes his children will help pay off the debt.

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Families that attend HBCUs are a prime example of the program’s consequences, Collins said, “because it’s the less privileged and less wealthy that are sending their children out to these things and that’s their only means in most cases.”

Parent PLUS Loans may add another struggle: instant repayment. Unlike federal student loans, parent borrowers are expected to immediately begin repaying the loan. Depending on how much they owe, the amount could take decades to pay back, furthering the chance of debt overlapping across generations.

Morehouse mother Vanessa Manley predicted it will take her and her husband 15 to 20 years to pay back their $30,000 in Parent PLUS Loans, but the loans were worth the investment.

“Some parents invest in material things. I invest in my child,” Manley said. Her son started at Morehouse in fall 2019.

For many parents, the value of sending their child to an HBCU is worth any cost. They see these institutions as pathways to success.

Roderick Hester just dropped off his third daughter at Spelman College. He took out Parent PLUS Loans for each of them. “If this will give my child the best opportunity to be successful in life,” he said, “This was the avenue I had to pursue. There wasn't a lot of options.”

Hester owes more than $200,000 in Parent PLUS Loans.

“I don't really know how I'm going to pay it back, but I'm planning on it,” Hester said. “Whatever I need to do is what I have to do.”

A billionaire paying off parents' loans

Some parents consider HBCUs a unique opportunity for their children to experience a predominantly black environment.

In order to pay for her son’s first two years at Morehouse, Carmelita Farrah borrowed $70,000 in Parent PLUS Loans. The idea that he would “experience his heritage” at Morehouse trumped her financial strain.

“The obstacles are stacked against him as a black man, so what will set them apart?” she said. “Hopefully an education. After that, a career. Because it’s a struggle. It really is.”

At Morehouse’s graduation ceremony last May, billionaire Morehouse alum Robert Smith brought national attention to the student loan problem at HBCUs when he made a surprise announcement at graduation: He said he would pay off every 2019 graduate’s student loans. Morehouse later said that gift would include Parent PLUS Loans.

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Frank Lawrence Jr., a Morehouse Alumni Association member and 2019 graduate whose debts were cleared by Smith’s gift, said the Alumni Association is “trying to encourage more alumni to give back.”

Other HBCUs have employed their own strategies to reduce student debt. In 2015, Paul Quinn College implemented a work-study model. The number of parents borrowing PLUS Loans has decreased over the four years since the program’s launch, according to President Michael Sorrell.

In addition to institutions trying to lower college debt, the nonprofit United Negro College Fund reported that this year alone, it is providing nearly $100 million in scholarships to more than 7,200 students of color. Not every student wins a scholarship, though.

“Loans are almost necessary without any scholarships, but students and their families have to shop around to find the best loans for them,” said Brian Bridges, UNCF’s vice president of research and member engagement.

“Parent PLUS Loans are an essential college financing option for some students and parents that can be improved; however, the program must be repaired, not repealed,” Bridges added.

Other experts agree that the Parent PLUS program should be improved.

The program is “doing a huge disservice to students of color and families of color when we’re saying that they can borrow however much they want,” said Colleen Campbell, director for postsecondary education at the liberal think tank American Progress.

Campbell added that families should not be allowed to spend more than they can contribute.

“If a family can only contribute $5,000 to their student’s education in a year,” Campbell said, “that’s probably the amount you should allow them to borrow.”

How to use parent loans safely

For families that have used the federal Direct PLUS Loans, or are considering the loan, experts offer advice about how to navigate the process and make decisions appropriate for their specific case.

Lodriguez Murray, vice president of public policy and government affairs for the United Negro College Fund:

• “Make sure you and your children are industrious about pursuing opportunities that are not loans before the student goes to school, including applying for other scholarship programs.”

• “If you have to use this tool to finance the education of the student, you are encouraged to have a conversation with the financial aid department at the institution and the counselor that you are offered to understand the terms of the agreement in advance”

Rachel Fishman, deputy director for research with the Education Policy Program at New America.

• The only safety mechanism for this loan for low-income families is to consolidate the parent plus loan and get income-contingent payment

• Know that you can’t transfer the loan to students, it’s not a co-signing. You’re taking full responsibility for this debt.

• Be aware of how much you’re borrowing and ask, ‘What are your repayment options?’

• Ask whether or not you can handle that burden, especially approaching retirement. Don’t assume you can repay the loan just because you get approved. The federal government can’t make that determination and it is not allowed to.

Colleen Campbell, director for postsecondary education at the Center for American Progress:

• Talking to your loan servicer is very important. They have gotten a bad reputation over the last couple of years, but they're really the only ones who can help you manage your loans. That is really important because otherwise, you're not going to get help.

• Going to community college and transferring to a four-year college is a way to reduce costs. It is worthwhile if you know your goal institution is accepting of transfer students - that you are basically guaranteed that your credits are going to transfer.

Noah Broder

This story was reported by Holly Barker, Noah Broder, Josephine Chu, Ebony Curry, Andre Earls, Apoorva Mittal, Lu Zhao and Priscilla Zhu. It was written by Ariana Puzzo and Kelly Rissman.

Open Campus, a nonprofit news organization focused on higher education, contributed to this project.

This article originally appeared on USA TODAY: Parent PLUS Loan: Forget student debt; college loans saddle family