Democratic senators are calling on President Biden to expand the amount of student loan forgiveness available to parents who took out loans to pay for their children’s college tuition. Experts also urge Congress to act to stop low-income parents facing such a financial burden in the near future.
Both argue that borrowers who took out Parent PLUS loans—which are federal loans with higher interest rates and fees that parents can use to help their children pay for college—have been left behind in the push for debt relief. These parents are often from lower-income families of Black or Latino descent, which can make it difficult for them to repay the debt many decades later.
Under the Biden Administration’s student debt relief plan, people who make less than $125,000 per year will receive up to $10,000 in forgiveness — including parents who took out loans for their children’s education.
Pell Grants are designed to assist low-income students and provide up to $20,000 of forgiveness to those who borrowed. Pell Grant parents are exempted from this benefit. Pell Grant recipients themselves are not eligible to receive this additional relief.
Eight Democratic Senators led by Chris Van Hollen from Maryland asked Biden to forego the additional $10,000 of forgiveness to Parent PLUS Borrowers whose children received Pell Grants. They also requested that the government include these borrowers in more flexible repayment plans that are based on income and that parents can participate in the Public Service loan forgiveness program, provided that their child holds a job that meets public-service requirements.
“These borrowers demonstrated significant financial need at the time they borrowed the PLUS loan, as evidenced by the fact that their students qualified for Pell Grants based on family income,” they wrote in the letter to Biden. “Like student borrowers who received Pell Grants, these borrowers also face numerous barriers to successful repayment and should receive relief.”
Parent PLUS borrowers owe $107 Billion in total student loans. This represents 10% of all U.S. student loan debt.
The Parent PLUS program initially targeted middle-class families. However, the majority of Parent PLUS recipients receive Pell Grants today, which makes them among the lowest-income students according to a May report by the Century Foundation.
Based on U.S. Education Department calculation, 42% of Black Parent PLUS borrowers and 26% Latino Parent PLUS loan borrowers contributed nothing to a college education in 2018.
That, coupled with the loan’s high interest rates, helps explain why many Parent PLUS borrowers struggle to repay those loans, especially as some parents are working jobs without the income benefit of a degree.
Peter Granville, a senior policy associate at the Century Foundation who authored the May report, found that 28% of students who used a Pell Grant and a Parent PLUS loan to pay for college have parents who did not attend college — parents who would therefore not be eligible for the additional $10,000 in debt forgiveness under the Biden Administration’s plan.
When their child graduates, the median Parent PLUS borrower owes $29 600. According to the Century Foundation, borrowers still owe approximately 55% and 38% of their original balances after 10 years.
Granville backs the changes Van Hollen made and others called for Biden, but he also wants Congress to act to ensure that Parent PLUS loans don’t burden more families.
“The ball is really in Congress’s court to change the underlying factors that lead to Parent PLUS being such a burden for some families,” Granville says. “We need sufficient grant aid, so that low-income families don’t have to take out these loans in the first place. Only Congress can do that on a national scale.”
He would like Congress to invest in endowments at historically Black colleges and universities, where the use of Parent PLUS loans is greatest; expand the Pell Grant; and work to make college more affordable overall, so families won’t need to rely heavily on Parent PLUS loans and other student loans in the future.
“How are they going to reduce the cost of college that parents face? Will they make the terms of Parent PLUS loans more friendly for parents?” he says. “Once cancellation has been done, we need to keep the pressure on Congress to take action for future student loan borrowers.”
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