Dozens of selective public and private universities are systematically steering low-income families into federal Parent PLUS loans they are unlikely to be able to repay — part of a deliberate financial aid strategy that has left tens of thousands of families in financial distress, according to a new report from the nonpartisan think tank New America.
Stephen Burd
Collectively, the 41 universities spent $2.4 billion in institutional financial aid on students without demonstrated financial need in 2023, the report found. Nearly two out of every five dollars those schools spent on institutional aid that year went to students the federal government deemed able to afford college without assistance.
Meanwhile, more than 32,000 families of Pell Grant recipients who had graduated or left those institutions in recent years carried outstanding Parent PLUS loan debt with a median load of nearly $30,000 — an amount that approached or exceeded their annual household income.
"Loading low-income families with Parent PLUS loans is part of the deliberate financial aid leveraging strategies that the country's largest enrollment management firms have been selling colleges," wrote Stephen Burd, a senior writer and editor with New America's Education Policy program and the report's author.
The Parent PLUS loan program was created by Congress in 1980 to help middle- and upper-middle-income families afford expensive private colleges. Unlike federal student loans, which are capped at $5,500 to $7,500 annually for dependent students, Parent PLUS loans historically have allowed parents to borrow up to an institution's full cost of attendance regardless of income. The loans cannot typically be discharged in bankruptcy and are subject to aggressive federal debt collection, including wage garnishment and Social Security benefit offsets.
The report frames the practice as "predatory inclusion" — a concept in which marginalized groups are given access to an opportunity, but under conditions that undermine its benefits.
