Thanks to Parent PLUS Loans, This Mom Owes $342,000

Attending college is meant to create upward economic mobility and give Black graduates more of a headstart in the world. Despite those good intentions, the increasing costs of attendance are crushing students and their parents with crippling debt.

Sheila Spence, 56, is a proud mother to three daughters who graduated from college. She raised them alone for the most part and spent years in welfare programs when her children were younger.

Today, she owes over $342,000 in student loans for herself and her children. And this is after making payments over the years.

Sending her eldest daughter to a private four-year college in 2009 was the start of this exponential growth in debt. Although scholarships and grants paid some of the cost, and despite being in a better place financially, there was still a large bill to pay out-of-pocket.

Most of Spence’s debt is from Parent PLUS Loans, at around $266,400. At the time, she says, the loans were a saving grace, but after getting three children through college, it’s become a “double-edged sword.”

Spence’s experience describes what The Education Trust, a left-of-center education advocacy organization, found in its brief on the topic.

Like any parent, Spence wanted her children to have the opportunity to receive a higher education, no matter the cost. So when the financial aid office offered her a Parent PLUS Loan, she signed on the dotted line.

However, she didn’t have a complete picture of the details of this loan.

“It wasn’t a ‘sit down, let me explain and have a nice conversation with you,’” Spence says. “It’s chop-chop. There are 25 people in the line behind you. At that point, at that moment, I’m willing to sign anything. If this will get her into the dorm, we’re going to do it.”

Parent PLUS Loans offer additional funding for higher education, but for Black parents, they’re often a long-term financial trap.

These loans account for $111 billion, with 3.7 million borrowers. According to Federal Student Aid portfolios, this is a small slice of the national student debt problem, which is a total of 44 million borrowers owing $1.6 trillion.

“Our borrowers and our parents don’t think of it as a trap; they think of it as a means for support,” says Brittani Williams, senior policy analyst in higher education at The Education Trust. “I use that term loosely because loan and support are not synonymous.”

How Parent PLUS Loans Work Against Black Parents

Launched in 1980 through the Higher Education Act, Parent PLUS Loans are a type of federal Direct PLUS Loan. Eligible borrowers are parents of undergraduate students.

They were created for middle- and upper-class families as an opportunity to pay the remaining balance for the cost of attendance not covered by federal and state grants, scholarships, and other forms of aid.

About 44% of Black students using Parent PLUS Loans have parents whose annual incomes are below $30,000, Georgetown Law’s Center on Poverty and Inequality found. These loans are also most common in Southern states.

“Because of the great disparities between Black employment, overall Black incomes, and Black wealth, you’re definitely seeing this huge gap between who’s able to pay back these loans on time and who’s not,” Ameshia Cross, assistant director of higher education communications at The Education Trust, says.

Parents with poor credit history may not be eligible, leaving Black students and their higher education at risk. Majority-Black communities have a median credit score of 627, which is considered fair by the credit bureaus.

Another concern around these loans is their repayment terms and high-interest rates. 

Interest for Parent PLUS Loans is at the highest rate in their history at 8.05% for the 2023-2024 academic year. The rates are feeling the effects of the recent increases from the Federal Reserve.

Meanwhile, the interest rate for federal Direct Subsidized and Unsubsidized Loans is 5.50%.

Repayment for Parent PLUS Loans begins immediately. However, parents can apply for a deferment of up to six months after the first disbursement. And these loans aren’t eligible for Income-Driven Repayment Plans, leaving parents with few alternative options for repayment.

These loans are like “high-interest, predatory payday loans,” Spence says.

Outlook for Black Financial Futures

Driving the need for lower-income families to use these loans is the continuously rising cost of higher education. Historically, Black students take on more debt than their counterparts and start adulthood with a negative net worth.

As for their parents, retirement and long-term wealth move even further from reach.

“They’re digging into their retirement funds and any savings, if they have any at all, to figure out how to pay this back,” Cross says. “It ends up being extremely crippling for them because they’re taking on multiple jobs and not even sure they can retire. It just makes it a lot harder for them.”

Trapping parents in debilitating financial situations wasn’t part of the original design of these loans. But Cross says they’ve become just that.

As a policy advocacy organization, The Education Trust recommends the government cancel at least $50,000 in federal student debt per borrower, make Parent PLUS Loans eligible for income-driven repayment plans, reduce interest rates, and increase access to these loans since there are few alternative options.

Other organizations, like the Urban Institute, have similar recommendations. They also recommend limiting the amount that can be borrowed, giving students more borrowing options, and discouraging institutions from pushing these loans on low-income families.

“There are so many people who don’t know how they’re going to survive or make it,” Spence says. “The one thing that would help is a skill or a degree, and we can’t even offer that for free. We expect them to pull themselves up by their bootstraps.”

But as parents like Spence know all too well, it’s hard to pull yourself up by your bootstraps when you don’t have any boots to begin with.

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