Parent PLUS loans deepen racial wealth gap, study finds – Inside Higher Ed
President Biden might cancel $10,000 of student debt, but civil rights advocates are worried that this figure is not enough to address core racial disparities seen in student debt burdens. A new study released Tuesday by the Century Foundation found that it is not just Black students who are hurt disproportionately by student debt, but also Black parents through federal Parent PLUS borrowing, a new finding on a federal program loan that has been mostly excluded from the student debt relief debate.
Black borrowers, who are more likely to be low income and low wealth, take on more student debt and often struggle to repay such debt. Graduating Black borrowers tend to owe 50 percent more in student debt compared to their white peers, increasing to 100 percent by four years after graduation. Additionally, Black college graduates hold seven times less wealth than white college graduates, contributing to struggles to repay student loan debt.
Civil rights organizations, including the NAACP, have stated that $10,000 in relief per borrower will not be enough to address the financial toll that student debt takes on Black borrowers. An analysis from the Roosevelt Institute found that canceling $50,000 of student debt per borrower would increase the wealth of Black Americans by 40 percent immediately and would dramatically boost economic recovery.
“While it does address some of the burden, it is not enough to really address the high balances that Black borrowers have,” said Victoria Jackson, assistant director of higher education policy at the Education Trust. “Black borrowers on average are borrowing around $39,000, which is much higher than any other racial or ethnic group.”
Parent PLUS Loans
Black parents are disproportionately burdened by debt taken on for their children to attend college through Parent PLUS loans, federal loans that parents can take out to help cover the cost of their children’s education.
The Century Foundation study found that 42 percent of Black Parent PLUS borrowers are low income and low wealth, compared to 26 percent of Latino and 8 percent of white borrowers. As a result, Black borrowers struggle to repay such debt, further contributing to the racial wealth gap.
“While Parent PLUS loans can open doors for children, they close many doors for the parents who hold them. These loans are now often taken out by families for whom college is already the least accessible—lower-income families and families of color—compounding the financial barriers they face, and trapping families in multigenerational debt,” said Peter Granville, the author of the report and senior policy associate at TCF.
Compared to other student loan programs, Parent PLUS loans are riskier and more expensive; at this time, 3.7 million Americans have parents who owe $104 billion through this federal loan program. They have higher interest rates and …….