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The Hechinger Report
“Stuck in it until I die”: Parents get buried by college debt too
ParentPlus loans have spiked, leading to financial disaster for many low- and middle-income families
By Meredith Kolodner
November 19, 2020
Jay Rife was sitting in his pickup truck on the outskirts of Las Vegas
when he answered a phone call that would permanently alter his life. A
man from the federal government was on the line and told him that the
loan he had taken out so his son and daughter could go to college had
come due. The monthly payment was $1,200.
“I thought I was going to pass out,” said Rife, who was making
$13 an hour as a maintenance worker. “I hung up the phone and just kind
of set there for an hour trying to figure out what I was going to do.”
He tried to avoid telling his wife, Tina, wanting to protect her from
the possibility of being plunged into poverty, but it wasn’t a secret
he could keep.
“I think we both sat and cried for a while over it,” said Jay, who is now 64.
Eighteen years after that phone call, the couple lives paycheck to
paycheck, still struggling to scrape together the monthly fee.
“I feel like I’m stuck in it until I die,” he says, sitting next
to his wife whose face draws down in disbelief when they discuss it.
The couple’s original $40,000 loan to cover the cost of their son and
daughter attending public universities in Indiana, where the family
lived at the time, has snowballed in those 18 years, with interest
rates as high as 8.5 percent. Their bill now stands at more than
$100,000.
The Rifes would have lost their house if they had been forced to make
the original monthly payment, so they negotiated with the federal
government to get it down to $733. Still, it’s more than their
mortgage, and it doesn’t cover the interest, so the amount owed has
continued to grow.
Jay and Tina are among the 3.6 million parents who currently have
federal loans designed specifically for parents who don’t have the
money to send their kids to college. Even when students take out their
own loans, the Parent Plus loan program enables parents to borrow more
to meet the full cost of college.
These families now collectively owe the government more than $98
billion, up from $68 billion five years ago. When the government
releases yearly student loan figures, which are astronomical in their
own right, it omits the amount parents have borrowed, obscuring the
true financial crisis for families. From 2003 to 2016, the average
combined student and parent debt for Parent Plus borrowers was nearly
$38,000, according to an analysis by the policy group New America.
Part of what pushes up those numbers are the government’s interest
rates, which are higher than private banks’ — they’ve averaged more
than 7 percent over the past decade. On top of that, the government
charges parents an additional fee of more than 4 percent of the total
loan, and the terms are relatively unforgiving. The government actually
makes money off Parent Plus loans, according to the Congressional
Budget Office.
Unlike student loans, with Parent Plus, it’s difficult to get a payment
plan based on a family’s income. That means that if a parent loses a
job or suffers a significant pay cut, they may be stuck with monthly
bills that they cannot afford.
More than one in eight parents will default on the loans, according to
the most recent government estimates. Nonetheless colleges and
universities continue to offer parents the loans, and Congress allows
them to borrow, even when administrators can see from a family’s
financial records that they have little possibility of repaying them.
Last spring, in the face of the coronavirus pandemic-induced economic
meltdown, the federal government allowed students and parents with
college loans to temporarily stop making payments without accruing
interest. But that reprieve is scheduled to end on Dec. 31. Neither
President Donald Trump nor President-elect Joe Biden has addressed the
possibility of extending the deadline.
Policy experts only expect the situation to get worse for Parent Plus
borrowers. Millions of Americans have lost their jobs or have had their
hours cut this year, and states face gaping budget holes, which in the
past have led to huge cuts to higher education. The result has been
spiking tuition, which in turn has led to increased student loans.
The Parent Plus program was originally designed for higher-income
parents for use at private colleges, and repaying was seldom a problem.
As the cost of public education rose, more low- and middle-income
families began seeking the loans, desperate to give their children a
shot at a secure future. But families’ debt loads soon increased as
well, according to federal data, raising the question of whether loans
that were ostensibly created to help parents are actually doing the
opposite. More than 200,000 families who made less than $40,000 per
year took out a Parent Plus loan in 2016 alone, an increase of more
than a third from 2008.
Not only does the government not consider a family’s ability to pay
when approving the loans, but there is no cap on the amount parents can
borrow. A parent could be homeless and still borrow the money, as long
as his or her credit rating isn’t terrible and the loan money is spent
on costs related to college.
“We’ve set parents up for a disaster when they are trying to do the
best for their kids but end up in financial crisis,” said Justin
Draeger, president and CEO of the National Association of Student
Financial Aid Administrators. “We’ve now saddled many parents with
unmanageable amounts of debt.”
Congress created the Parent Plus program and controls its terms, but
the Department of Education oversees the program. An Education
Department spokeswoman said the agency is “very concerned about the
debt that low-income parents could take on through the Parent Plus loan
program,” but hopes to aid parents in their decisions by increasing the
information available online through the department’s College Scorecard.
Like Tina and Jay Rife, parents aren’t racking up this debt just to
send their kids to high-priced private colleges. From 2009 to 2019, the
amount of Parent Plus loan money flowing to public universities each
year more than doubled, to $6.6 billion, and the average yearly loan
taken increased by 45 percent, to more than $14,000.
The Rifes’ daughter, Stacy Johnson, who is now 41, got a good job as a
nurse after she graduated. She is managing her own student loan
payments, raising a family and sending her parents what money she can
to help them out. It pains her to know that her 63-year-old mother, who
has become disabled and can no longer work, goes without health
insurance so that her parents can make their loan payments.
“They fulfilled my dreams,” said Stacy, her voice strained with
concern. “But it’s affected them. … I don’t think that parents should
have to jeopardize their future to put their kids through college.”
Since Johnson graduated from Indiana University in 2001, the parent
loan crisis has gotten remarkably worse, especially for parents whose
children attend public universities, the ones that are supposed to be
financially accessible to state residents.
In 20 states the number of Parent Plus loan recipients whose children
attended state schools has grown by at least 50 percent, and the
average loan amount has grown by at least 50 percent in 23 states.
In Louisiana, which has sustained enormous cuts to its higher education
budget, 8,700 parents borrowed a combined $107 million at an average of
more than $12,000 in 2019 alone. And in Delaware, the average Parent
Plus loan grew to $21,000 last year.
Grindl Weldon is among those parents who thought that sending her child
to an in-state public university would be an affordable option. She
made the same wrenching decision as Jay and Tina Rife after she
calculated what it would cost to send her daughter, Caitlin, to the
University of Alabama. Now, at 48, she’s about the same age as the
Rifes were when their loans came due.
Caitlin had worked hard and graduated fourth in her class from J.B.
Pennington High School, in a rural area of northern Alabama. Her
community chose her as the recipient of a special $10,000 scholarship,
to be spread out over four years, and she had worked since she was 16,
saving money along the way.
Caitlin took out the maximum allowed in federal student loans, received
a Pell Grant from the federal government and got a small scholarship
from the University of Alabama, where she had always dreamed of going.
Altogether, they had enough to cover tuition for the first year, but
there was still a big hole: The university requires freshmen to live on
campus and buy a meal plan, and she didn’t have enough money for that.
Weldon faced a choice. As a single mom and teacher (she was her
county’s high school teacher of the year in 2018), she had no way to
scrape together the money that would allow her daughter to register for
classes. She had worked summers and taught online courses to make extra
money, but a college education for her only child at the state’s
flagship public university was still thousands of dollars out of reach.
The financial aid offer letter from the university included the option
to take out a Parent Plus loan to close the gap, and Weldon could defer
paying it off until after her daughter graduated. So she took the
plunge and borrowed $20,000 in 2014. Two years later, she borrowed
another $5,000.
“I knew I was getting myself into debt, but what were my
choices?” said Weldon, who, on top of her full-time job, now cares for
her mother who has Parkinson’s disease. “I felt like her future was at
stake. What would any mama do?”
For many low- and middle-income families in Alabama, the state’s public
universities are out of reach. At the lowest-cost college, the
University of North Alabama, families making from $30,000 to $48,000 a
year paid, on average, nearly $13,000 for their child to attend in
2018-19. At Auburn University and the University of Alabama, the
average cost was about $20,000.
Even when students took out the maximum loans allowed by the federal
government, families making $30,000 or less had to come up with at
least $6,000 more out of pocket to enroll their first year — and more
than $12,000 at the most expensive universities, according to a
Hechinger Report analysis of data from the U.S. Department of Education.
As a result, many parents are advised to apply for a Plus loan to close
the gap, and that decision can lead families down a dire financial road.
From 2009 to 2019, the number of Parent Plus borrowers at Alabama’s
public universities nearly tripled; the amount borrowed nearly
quintupled to $250 million, with an average loan of more than $17,500.
That spike mirrors the slashing of the state’s education budget and the
jump in tuition costs.
Like many children whose parents have Plus loans, Caitlin Weldon isn’t
currently in a position to help her mom. Caitlin, now 24, is trying to
pay off her own student debt, which stands at more than $32,000.
And then there are her mom’s student loans.
Grindl Weldon’s family didn’t have much money when she was growing up
in Montana. She joined the National Guard straight out of high school
to earn money for college. She enjoyed her two years in the Guard, so
she enlisted in the Army where she served for four years and met her
husband.
They moved to Alabama when Caitlin was 14 months old, and Weldon
enrolled at the University of Alabama at Huntsville. She’s been a
teacher for more than 15 years and has gotten her own student debt down
to about $25,000. When her Parent Plus loans came due last fall and she
learned that her combined monthly loan payments would be $537, she had
the same reaction as Jay and Tina Rife.
“I was about to have a breakdown and cry,” she said, as she drove her
mom to a much-needed dental appointment she’d had to delay for several
years because of the expense.
She got a second job this fall teaching a class online and will do the
same this spring, but it won’t be enough to cover the loans. Weldon is
grateful for the temporary respite the government granted student loan
borrowers, but once her loans come due again, she’ll be facing the same
grim financial situation.
Educators and policy experts say there’s enough blame to go around for
the economic precariousness facing hundreds of thousands of Parent Plus
borrowers. There’s the federal government, which disburses the money;
Congress, which created the program in the first place; state
legislators, who slashed financial aid to public universities, which
many educators and policy experts see as the root of the problem; and
the colleges themselves, which offer the loans and sometimes encourage
parents to take them out.
Financial aid officers at several universities said it was standard
practice to offer a Parent Plus loan when they send out an acceptance
and financial aid offer. They said they often knew that the parents
taking out the loans would struggle to repay them.
“I don’t think these loans should be presented with the financial aid
offer at all,” said Amy Laitinen, director for higher education at New
America. “I think it speaks more to the school’s desire to bring in the
students than to what’s best for the family. … To present it as if it’s
really a way for paying for college when there’s no way for those
parents to pay it back is shameful and harmful.”
In 2011, the Obama administration set restrictions on who could borrow
through the Plus program, imposing credit and income requirements. But
an outcry from colleges caused the administration to reverse course the
following year, making it even easier for parents to borrow.
Critics compare the government’s loans to those given out by banks to
people who couldn’t afford to repay in the lead-up to the 2008
financial crisis. Unlike student loans, parental loans offer no easy
option for an income-based repayment plan. If a parent defaults, the
federal government can garnish wages and Social Security checks to
force repayment.
Rep. Marcia Fudge (D.-Ohio) introduced a bill last year that would cap
Parent Plus interest rates, allow for income-based repayment plans and
mandate counseling for all borrowers, but it has been stuck in
committee. Biden has not announced any plans regarding the program.
Even before the economy cratered this spring, reliance on Parent Plus
loans was trapping a slice of middle-aged and older Americans in a
debtor’s purgatory.
Like Jay Rife, Weldon said she expects she’ll die in debt. She doesn’t
live in a wealthy part of the country and assumes that other parents
are facing a similar future, but she said that few people talk about
their debt.
“There’s an embarrassment, I guess, for not having the financial
ability,” said Weldon, sitting across from her daughter in a taco
restaurant near the University of Alabama’s lush campus. “It’s almost a
kind of embarrassment for not being rich.”
“Maybe if more people knew they weren’t the only ones, something would change,” she said. “That’s what I’m hoping.”
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