The Wealth Gap PLUS Debt

Today, New America released The Wealth Gap PLUS Debt: How Federal Loans Exacerbate Inequality for Black Families. This report looks at the Parent PLUS loan program and how it could widen the racial wealth divide by promoting debt among low-income Black families. The report focuses on Black families because they experience a wider racial wealth divide, and there is alarming new evidence that they also have the worst student loan repayment outcomes of any racial or ethnic demographic.

The report is broken up into three primary parts:

• Part I looks at the share of borrowers by various demographics including adjusted gross income, expected family contribution, institutional sector, and race/ethnicity. It assesses average intergenerational federal higher-education debt which reveals that low-income Black families are particularly burdened with large intergenerational education debts compared to their white peers.
• Part II explores the implications of the racial wealth gap and how policies like PLUS will contribute to its widening.
• Part III reviews the subsequent growth of the Parent PLUS loan program after the past five years while all other federal undergraduate  loans have been declining.

The report ends by providing recommendations of what must be done to prevent lending that discourages wealth building among Black families, and to ensure students of color have access to an affordable higher education.

To read the report, please click here.