Student debt is not out of the ordinary for families in the U.S., but a Medill News Service report shows parent borrowing is disproportionately burdening Black families and those who attend historically Black colleges and universities (HBCUs). The federal government’s Parent PLUS Loan is becoming popular among lower-income parents as a last-ditch effort to help afford education costs. Now, it’s placing them under debts that reach up to six figures.
The Parent PLUS Loan began in the 1980s to help upper- and middle-income families pay for their children’s education while keeping their assets liquid. The loan has high interest rates, and the program checks only a borrower’s credit history and not the borrower’s ability to repay it. It is not ideal for those in lower-income brackets, but it is sometimes the last remaining option for many families who want to educate their children.
They are often a final attempt at covering the costs that remain after students max out on other loans.
Forty percent of Black Parent PLUS borrowers have incomes of $30,000 a year or less, compared with 10% of white Parent PLUS borrowers with incomes that low.
The Parent PLUS Loan’s adverse effects are especially evident at HBCUs.
Medill News Service took data from the Department of Education and the National Center for Education Statistics to look at the specific impact of Parent PLUS Loans on HBCUs.
It found Black families make up 19% of Parent PLUS borrowers, but Black students make up 12% of the national student body. Based on data, white families use the loans increasingly more in higher income brackets. But for Black families, the lower the income bracket, the more common the Parent PLUS loan is.
Because a large proportion of Parent PLUS borrowers are Black and the majority of HBCU students are Black, Parent PLUS debt is affecting HBCUs, with 23.4% of students at HBCUs using Parent PLUS loans, as opposed to 8.5% of students overall.
A study by the Institute on Assets and Social Policy (IASP) that came out earlier this year found student debt is a large contributor to the racial wealth gap. Though people of color still face discrimination in the labor market and are more likely to be supporting older relatives, the earnings gap among the races is closing, while the wealth gap overall remains wide. The study found student debt is what is primarily holding people of color back financially.
The numbers Medill News Service reports reflect that the loan, which allows borrowers to take out however much they need regardless of their means, is doing families of color a disservice in the long run.
The effect of these loans is often overlapping, intergenerational student debt. While a parent may still be working on paying off their own student debt, they may also be working on paying their child’s. Unlike other student loans, Medill News Service reports, Parent PLUS loans require borrowers to begin repayment immediately.
Though this debt is burdensome and in many ways plays a role in the cycle of generational poverty and the racial wealth gap, many families believe sending their children to HBCUs is worth any cost. An opportunity to attend an HBCU is, in and of itself, a path to success a students’ parents or grandparents may not have had.
Medill News Service interviewed Carmelita Farrah, who took out $70,000 in Parent PLUS Loans so her son could attend Morehouse College, an HBCU.
“The obstacles are stacked against him as a black man, so what will set them apart?” she told the outlet. “Hopefully an education. After that, a career. Because it’s a struggle. It really is.”