The Black Hole of PLUS Loan Outcomes

Much of the debate about improving federal higher education data quality has focused on whether a student unit record dataset is necessary in order to give students, their families, and policymakers the information they need in order to make better decisions. Last month’s release of College Blackout: How the Higher Education Lobby Fought to Keep Students in the Dark by Amy Laitinen and Clare McCann of the New America Foundation highlighted the potential role of the higher education lobby in opposing unit record data. However, privacy advocates note the concerns with these types of datasets—and these are concerns that policymakers must always keep in mind.

Colleges are already required as a condition of the Higher Education Act to report institutional-level data on some outcomes to the federal government, which are then typically made publicly available through the Integrated Postsecondary Education Data System (IPEDS). In what is an annoying quirk of the federal government’s data reporting systems, the best source for data on the amount of certain types of aid received (such as work-study or the Supplemental Educational Opportunity Grant) is the Office of Postsecondary Education’s website and is not available through IPEDS. Student loan default rates (for Stafford loans) are available on Federal Student Aid’s website, which is also not tied to IPEDS. The lack of a central database for all of these data sources is a pain for analysts (consider the technical appendix to my paper on campus-based aid programs), but it typically can be overcome with a mix of elbow grease and knowledge of the difference between UnitIDs and OPEIDs.

Yet, until last week, we knew absolutely nothing about the outcomes for students and families who took out federal PLUS loans. These loans, which require a credit check for the parents of undergraduate students, have gained attention recently due to the federal government’s 2011 decision to tighten eligibility criteria in order to reduce default rates. This disproportionately affected enrollment at historically black colleges and universities, many of which are private and do not have large endowments that provide institutional aid funds. Some analysts, such as Rachel Fishman at New America, have called for PLUS loans to be severely curtailed or even eliminated.

The Department of Education provided a negotiated rulemaking committee with data on PLUS denial rates and default rates by institutional sector (public, private nonprofit, and for-profit) last week, marking the first time these data had even been made public. These data were only provided after members of the committee complained about a lack of data on the proposals they were discussing. (The data are available here, under the pre-session 2 materials header.) The data on loan balances suggests that the average parent PLUS loan balance among borrowers at four-year private colleges is $27,443, compared to $19,491 at four-year publics and $18,133 at four-year for-profit institutions. Three-year default rates at for-profit colleges were 13.3% in fiscal year 2010, compared to 3.4% at private nonprofits and 3.1% at public institutions. And the total amount of outstanding PLUS loans (undergraduate and graduate students combined) is just over $100 billion, or roughly 10% of all student loan debt.

A piece in Thursday’s Inside Higher Ed quoted a HBCU president who noted that there was no reason to tighten loan criteria given the low default rates in the data. But the public has no idea what any college’s default rate is on PLUS loans, given the release of broad sector-level data. The piece goes on to note that the Department of Education says institutional-level data are not available for PLUS loans, in part because there is no appeal process in place for colleges. This has the effect of insulating programs that take in large amounts of PLUS funds, do not graduate those students, and as a result they default. Right now, there is no accountability whatsoever.

The Department of Education needs to release institutional-level PLUS loan data to improve transparency and accountability. However, they claim that these measures do not exist—an assumption which borders on the absurd given the existence of the data in the National Student Loan Data System and their ability to calculate sector-level measures. ED’s response has been that colleges do not have the ability to appeal the data, but this can be easily remedied. In the meantime, I hope that the higher education community uses the Freedom of Information Act to request these data—and that advocates are willing to go to court when ED says the data do not exist.

Author: Robert

I am an a professor at the University of Tennessee, Knoxville who studies higher education finance, accountability policies and practices, and student financial aid. All opinions expressed here are my own.

3 thoughts on “The Black Hole of PLUS Loan Outcomes”

  1. Yet colleges are still allowed to auto-award plus loans to families without enough funding to cover their tuition. Additionally, there is no true “Credit Check” other than a confirmation of no 90+ day delinquencies on the parent’s credit. DTI, Credit Score, and ability to repay the debt are not considered before lending the parent plus loan, making this a potentially disastrous options for uninformed families.

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