Tag: PLUS

A First Look at Parent PLUS Loan Burdens of Graduates

Earlier this week, the U.S. Department of Education released its long-awaited updates to the College Scorecard website and dataset. The updated institution-level dataset has two glaring omissions that carried over from last year’s update. The first is that student loan repayment rates are no longer tracked, which is frustrating given the size of the federal government’s student loan portfolio. Taxpayers and students have the right to know whether students can manage their loans without heavy reliance on income-driven repayment. The second is that post-college earnings are excluded once again at the institution level. The program-level dataset (which I will discuss in a future post) has data, but just for graduates. That’s really useful for colleges with low graduation rates!

But in good news, this year’s Scorecard includes data on Parent PLUS loans. There are currently $101 billion in Parent PLUS Loans outstanding, $10 billion more than just two years ago. Parent PLUS loans do not count in the current cohort default rate measure, but the few studies that have gained access to PLUS data suggest that default and repayment are concerns. Because the older parents of students are expected to pay off these loans as they approach retirement, Parent PLUS loans also raise concerns about the intergenerational transmission of wealth and the growing racial wealth gap in America.

In this blog post, I dig into new Scorecard data on median Parent PLUS loan debt among 2017-18 and 2018-19 graduates, focusing on bachelor’s degree recipients attending 1,103 public and private nonprofit colleges (excluding special-focus institutions) that had sufficient data on student debt and other institutional characteristics.

First of all, the median institution had median Parent PLUS debt among borrowers of $24,399 and median student debt among borrowers of $24,250. The first graph below show that median student debt and median parent debt are only weakly correlated. This is not surprising due to the presence of loan limits for undergraduate students (a maximum of $31,000 for dependent students). But it does seem like some students turn to parent loans after hitting the cap on student loans.

The Scorecard also provides an estimate of the percentage of students whose parents took PLUS loans, and the upper bound of the estimate is 15%. The next graph shows the relationship between the percentage of students whose parents take on loans and median parent debt. There is a positive relationship here, although this is driven in part by the small number of colleges with high borrowing rates. Very few colleges have more than 30% of parents taking on PLUS loans.

The next graph examines the relationship between Parent PLUS debt and the percentage of students who received Pell Grants in 2013-14 (the likely entry year for many of these graduates). There is a strong negative relationship, which could be due to expensive private colleges being more likely to have fewer Pell recipients. The parents of Pell recipients may also seek to borrow less money than non-Pell parents, which is strongly hinted at in Scorecard data that separates borrowing by Pell status.

Historically black colleges get a lot of attention for high Parent PLUS loan burdens, but this did not hold in my sample. The 50 HBCUs with complete data had median PLUS debt of $16,531 and median student debt of $29,502. This compared to $24,540 in PLUS debt and $24,000 in student debt for non-HBCUs. HBCU graduates likely have more in student debt because students can borrow more under their own name if their parents do not qualify for PLUS loans. The two graphs below show no consistent relationship between parent debt and the share of Black or White students.

Finally, I peeked at institutional selectivity (proxied here by ACT composite scores). As median ACT scores rose, parent debt also rose. This is likely due to selective colleges being much more expensive and parents being willing to spend lots of money to send their children there.

My next post will dive into the new program-level data, but I’m happy to take requests for additional institution-level factors to consider that could affect parent debt. This could turn into an interesting short journal article!

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.