Parent PLUS Loans Disproportionately Increase Debt for Black Families

Borrowing parent PLUS loans helps students attend college. But for Black families, the burden of debt may outweigh the benefits.

portrait of Vanesha McGee, M.Ed.
by Vanesha McGee, M.Ed.

Published on July 13, 2022

Reviewed by Paige J. Gardner, Ph.D.

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Parent PLUS Loans Disproportionately Increase Debt for Black Families
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According to The Century Foundation's 2022 study, parent PLUS loans account for $104 billion in debt nationwide. Nearly 4 million families access these federally funded loans to pay college tuition bills for their children.

The average amount of debt incurred by families taking out parent PLUS loans is about $29,600. For most families, 55% of the loan's balance remains after ten years of repayment. For Black families, the average remaining balance is 96%.

Parent PLUS loans offer fewer options to reduce monthly payments or seek loan forgiveness than others, making them a riskier investment for borrowers.

Black, low-income, and Latino/a families take out parent PLUS loans at disproportionately higher rates than others. According to The Century Foundation, 42% of Black parent PLUS loan borrowers are low income and low wealth. Latino/a families are 26% low-income and low-wealth, while 8% of white families belong to these categories.

The difficulty of repaying parent PLUS loans increases the burden of debt for many Black families and increases the racial wealth gap across the country.

What Is a Parent PLUS Loan?

Parent PLUS loans provide parents of undergraduate students with federal funds to pay education-related expenses. This type of federal loan is provided regardless of financial need. The maximum amount a parent can borrow using the parent PLUS loan is the amount of their child's tuition minus other forms of financial aid.

Funds issued for parent PLUS loans are sent directly to the college or university to cover tuition and fees. This federal funding is offered to biological and adoptive parents of students enrolled at least part time at eligible schools.

Racial Disparities in Student Loan Debt

According to a BestColleges 2022 trend report, Black families carry more student loan debt after graduation, regardless of income. Higher debt levels impact credit scores, access to homeownership, and wealth accumulation. These impacts widen the racial wealth gap, making it more difficult to pass down wealth or to improve socioeconomic status.

As per the BestColleges report, 68% of white undergraduates and about 86% of Black undergraduates take out federal loans to pay for college.

According to a Brookings report, four years after graduation, the average Black student owes $52,726, while the average white student owes about $28,000. Paying off student loans reduces monthly income by hundreds of dollars, impacting daily financial choices and livelihoods.

On average, 50% of white families have over $100,000 in savings and investments, as per The Century Foundation. This wealth accumulation can help in parent PLUS loan repayments. Unfortunately, only about 25% of Black families and Latino/a families hold the same amount of wealth.

Race alone does not indicate a student's debt level after college. However, the disparities indicate the difficulties for Black graduates to repay student loans and accumulate wealth after college.

How Parent PLUS Loans Impact Black Families

Historically Black Colleges and Universities (HBCUs), schools that educate high populations of Black students, account for nearly 90% of schools where 10% or fewer parent PLUS loan borrowers can keep up with their loan repayment plans, as per The Century Foundation.

After ten years, parents of students attending HBCUs and other colleges with high Black enrollment owe an average of 96% of their original loan amount. White families making parent PLUS loan payments still owed an average of 47% of their loan after the same time frame.

In 2018, 42% of Black parent PLUS loan borrowers expected they could not contribute any money towards paying for their child's college education. Low family contributions indicate a higher need to borrow money to pay for college.

With lower overall wealth accumulation for Black families, the difficulty in repaying parent PLUS loans can push families into debt. Parents are not the recipients of higher education benefits — potential wage increases and access to high-paying jobs. This makes repaying PLUS loans all the more difficult for families. Parent PLUS loans, created to aid families in sending their children to college, now play a role in increasing the burden of debt on Black families.

Frequently Asked Questions About Parent PLUS Loans

Would canceling student debt promote racial equity?

Yes. Canceling student loan debt promotes racial equity nationwide. Recent studies, such as a 2020 study by the Roosevelt Institute, found that canceling student loan debt for individuals or households would increase wealth among Black families. Since Black families are more likely to take out loans to pay for college, canceling student debt can improve economic and racial equity and opportunities for wealth accumulation.

Achieving racial equity requires more than student debt cancellation. However, decreasing the amount of money owed for education can improve racial equity.

What is the average student loan debt?

As of 2022, almost 45 million students owed money on a federal student loan. The average student loan debt for bachelor's degree-holders who attended public or private nonprofit schools was $28,400 in 2020.

How long does it take to pay off student loans?

Depending on specific debt amounts and monthly payment amounts, students pay off their loans at different rates. People can choose student loan repayment plans that last anywhere from 10-30 years.