Study: Parent PLUS Borrowers and the Racial Wealth Gap

Parent PLUS loans are held by more than 3.7 million families and account for upwards of $104 billion in student debt nationwide. These loans have high interest rates and fewer options to lower monthly payments, so the risk of default is greater compared to other federal student loans.

“I think this report takes a comprehensive look at what I always felt was a bellwether for the serious affordability issues in higher education, particularly for Black families,” said Rachel Fishman, deputy director for higher education research at New America, a think tank. Fishman has also researched Parent PLUS loans in recent years. “We could be solidifying a racial wealth gap with something seen as supposed to mediate that racial wealth gap.”

Fishman explained that Parent PLUS loans were initially created to give middle-class and upper middle-class parents more flexibility for how to pay for college. Yet the skyrocketing cost of tuition and fees has meant more low-income families have used these loans despite their perilous terms. At the same time, public funding for higher education, particularly federal grant aid for students, has not caught up with price hikes.

“More and more families have had to turn to this loan in ways that it was never intended to be utilized for,” said Fishman. “The way this program was created does not protect the borrowers in the program.”

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