Regular decision deadlines for college hopefuls are around the corner—and the costs of attendance will be front and center for families this holiday season. With limited financial aid options, many families may use Federal Direct Parent Loans for Undergraduate Students (Parent PLUS) to help their children pay for higher education.
Parent PLUS, the only federal financial aid option designed for parents in the United States, can open doors to higher education. But for parents with low incomes and parents of color, Parent PLUS imposes serious risks—including crushing, unrepayable debt that can put rent, groceries, and retirement in jeopardy.
The current Parent PLUS program leaves many families walking a financial tightrope. A single emergency—like a health crisis or unexpected expense—could tip a parent borrower into long-term financial hardship or permanently delay retirement. Parents should not have to choose between their child’s education and taking care of their daily needs.
How Did We Get Here?
The Parent PLUS program was created in 1980 to provide high-wealth families with a low-interest loan option for parents supporting their children’s college costs. But as tuition has soared and federal and state funding has lagged, hundreds of thousands of low-income parents have turned to Parent PLUS loans in the absence of other sufficient aid options. Since 2008, Parent PLUS borrowing has surged, with parents of color, particularly Black parents, bearing a disproportionate share of the increase. The program’s design, combined with racialized economic inequality, places families of color at heightened risk—a pattern that requires critical action from policymakers.
Four Ways To Reduce Parent PLUS Loan Harms
GCPI has developed four priority recommendations to mitigate the risks of Parent PLUS loans becoming an intergenerational burden. These recommendations build upon and complement existing proposals to reform higher education financing and protect the economic security of low-income families and families of color.
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- Strengthen Pell Grants To Reduce the Need for Parent PLUS. Since 1973, Pell Grants have helped millions of low-income students afford college, but the value of the program has fallen dramatically. Once covering over 75 percent of average attendance costs, the maximum Pell Grant now only covers less than 30 percent of the average costs of a four-year institution. Many low-income families and families of color have had to take on unrepayable debt through Parent PLUS to bridge the gaps in aid. To advance racial equity and lower or even remove the need for Parent PLUS loans entirely for families with low incomes, policymakers should make Pell Grants inflation-adjusted, fully funded, and sufficiently robust.
- Extend SAVE Eligibility to Parent PLUS Borrowers. Currently, parents with Parent PLUS loans are not eligible for the Saving on a Valuable Education (SAVE) repayment program, an Income-Driven Repayment (IDR) plan that would provide meaningful relief to low-income borrowers. Allowing Parent PLUS borrowers to access the SAVE program would make repayment more feasible and reduce the risk of default.
- Increase Direct Subsidized Loan Limits for Students With Low Incomes. While taking on more debt is not ideal, allowing students to borrow in place of their parents is an important step towards reducing parents’ need for risky Parent PLUS loans. Compared to Parent PLUS loans, Direct Unsubsidized Loans, and private loans, Direct Subsidized Loans for students—need-based loans for which the federal government pays the interest—offer a safer option for low-income families.
- Prohibit Garnishment of Low-Income Parent Borrowers’ Wages. Parents who default on their Parent PLUS loans can have part of their income garnished—a devastating blow, especially for aging, disabled, or retired parents with limited incomes. Policymakers should end the garnishment of income for all federal student loans, especially for low-income families struggling to repay Parent PLUS loans.
Low-income families are feeling the pressure from all sides as costs for medical care, groceries, and gas keep climbing while wages remain stagnant. The racial wealth gap is growing. Higher education is often seen as a pathway to a better future, but for too many families, it may take a lifetime (or two) to pay back.
Meaningful change is possible despite current political challenges. One key step is reforming the Parent PLUS loan program, which disproportionately burdens low-income families and families of color. Policymakers need to overhaul the system to reflect the current economic realities facing borrowers today. This means:
- Increasing federal investments in grants that actually cover tuition;
- Fixing unfair loan terms that trap low-income borrowers in debt; and
- Offering flexible repayment options that allow families to breathe.
The time for change is now, and policymakers must act quickly to make sure college is a pathway to opportunity—not an intergenerational financial nightmare.
Learn More: GCPI’s latest brief, “Four Ways to Prevent Unrepayable Debt & Increase Opportunity for Parent PLUS Borrowers,” dives deeper into our four priority recommendations for federal policymakers and U.S. Department of Education officials to ensure low-income students and their parents are not driven into unrepayable debt and poverty to access higher education.