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.
Among private universities, St. John's University in Queens, New York, topped the list for the share of PLUS loan borrowers who were parents of Pell Grant recipients: 56 percent, with a median debt load of more than $42,000. Families of former St. John's students now collectively hold approximately $633 million in outstanding Parent PLUS loan debt, third among all selective colleges in the country.
Among public institutions, the University of Alabama stands out. The Tuscaloosa flagship spent $185 million on non-need-based aid in 2023 — second only to Arizona State University, which enrolls far more students. The report traces Alabama's trajectory to 2003, when then-President Robert Witt launched an aggressive national recruitment strategy modeled in part on George Washington University's enrollment playbook. Between 2010 and 2016, as Alabama tripled its non-need-based aid spending to $146 million, PLUS loan borrowing at the institution grew by 60 percent and the total amount borrowed doubled to $96 million.
Today, nearly 13,000 families of former Alabama students owe approximately $723 million in outstanding Parent PLUS loan debt — the second-largest total among all colleges in the country.
The report also examines how Alabama's aggressive posture forced competitors to respond. Auburn University, which spent less than $100,000 on non-need-based aid in 2006, was awarding $66 million to non-needy students by 2023. Louisiana State University, which under former Chancellor F. King Alexander resisted enrollment management trends and significantly grew its enrollment of Black and Hispanic students, reversed course after his 2019 departure and has since seen its Parent PLUS loan volume double, from $41 million to $83 million.
The report warns that a "tsunami" of student and parent loan defaults looms. Congress imposed borrowing caps of $20,000 per year and $65,000 total on Parent PLUS loans beginning July 1, 2026, but the report cites a recent Brookings Institution analysis concluding the new limits will continue "leaving financially vulnerable families exposed to unmanageable debt burdens."
Burd calls for adding an ability-to-repay standard to the Parent PLUS program, requiring colleges to bear financial responsibility when large numbers of their students' families default, and banning institutions from packaging PLUS loans in financial aid award letters.
"It is time for policymakers to address the real affordability crisis in higher education for the vast majority of Americans," Burd writes, "instead of standing by as selective public and private colleges and universities fight over and cater to the students who already have every advantage in the world."
