PLUS Borrowing in Texas: Repayment Expectations, Experience, and Hindsight by Minority-Serving Institution Status

Abstract

After decades of college costs outpacing inflation, institutions of higher education have become less able to meet the full financial need of students (Clark, 2015) (Walizer, 2018). For families trying to fill this gap, the Federal Direct PLUS for parents (PLUS) has been an increasingly popular, but problematic, financing option. The program enables parents to incur substantially larger amounts of education debt than their college student children even though the parents, unlike their children, receive no direct economic returns on the investment. Eligibility for PLUS entails only a modest check for adverse credit, not a more thorough – and common – check of credit worthiness that reflects ability to repay the debt. Consequently, some parents with low credit scores may borrow more than they could reasonably be expected to repay, but lack some of the programmatic repayment options and protections available to student borrowers. And, because loan counseling is not mandatory for PLUS borrowers, some parents may be less informed than student borrowers. For these reasons, Trellis conducted a study of parent borrower repayment patterns and a qualitative analysis of parent perceptions of the loan process and its effect on other financial experiences. In particular, Trellis examined the experiences of parents whose children borrowed while at either an Historically Black College or University (HBCU) or a Hispanic Serving Institution (HSI) since these schools serve a higher proportion of students from low-income families who might have lower credit scores. Additionally, these minority serving institutions (MSIs) historically have been underfunded and, consequentially, often lack the financial strength to meet the full financial need of its students whose parents, in turn, become more reliant on PLUS loans to gain access to higher education for their children. This study found similarities and differences in borrowing experiences between MSI parents and Non-MSI parents.