Black Families Disproportionately Impacted by Parent PLUS Borrowing

A recent report reveals that 10 years after starting repayment, parents whose children attended top colleges for Black enrollment still owe 96% of their principal.

Published September 13, 2022

Edited by Darlene Earnest
Black Families Disproportionately Impacted by Parent PLUS Borrowing
Opinion & Analysis
Photo by Georgijevic / E+ / Getty Images

  • Thirty-five percent of Black and Latino/a parent-borrowers earn less than $50,000 a year in combination with their spouse or partner.
  • Black families are most likely to be unable to financially contribute to their child's education.
  • Under Biden's debt relief plan, Black and Latino/a families should be positively impacted the most.

Black and Latino/a families have long felt some of the greatest burdenheld the majority of student loan debt, further contributing to an inability to grow savings and wealth in these communities.

A recent report from The Century Foundation reveals that these individuals also hold disproportionate amounts of debt through Parent PLUS loans.

The median Black and Latino/a parent-borrower has a lower income, less savings, and more additional debt for their own education than the median white parent who holds these types of loans.

Median annual household earnings of parent-borrowers, by race
White $100,000+
Latino/a $75,000-$100,000
Black $50,000-$75,000

Source: The Century Foundation

More than a third of Black and Latino/a parent-borrowers (35%) earn less than $50,000 annually in combination with their spouse or partner.

Black and Latino/a families are also significantly more likely to struggle with repayment and to default on Parent PLUS loans. A 2019 report found that the default rate for parents of Black students is 20%, compared to 5% for parents of white students.

Ten years after starting repayment, borrowers whose children attended top colleges for Black enrollment still owe 96% of their principal, according to The Century Foundation. Borrowers whose children attended top schools for white enrollment, however, owe just 47% of their principal 10 years later.

According to the report, one of the main differences between Black and white families when it comes to Parent PLUS borrowing is that they do not take out these loans in the same ways.

For white families, Parent PLUS borrowing increases as income increases, meaning that more of those who can repay take out loans in the first place. For Black families, borrowing increases as income decreases, meaning Black borrowers are often poorer than their white counterparts.

Because Black families with lower incomes are more likely to take out Parent PLUS loans, a larger percentage are unable to financially contribute to their child's education out of pocket. In other words, they have an expected family contribution (EFC) of zero.

Between 2000 and 2018, the share of Black families with an EFC of zero increased by 32 percentage points. During the same period, the share of Latino/a families with an EFC of zero increased by 12 percentage points, and the share of white families with an EFC of zero increased by just 5 percentage points.

Asian families are the only group where the share of individuals whose EFC is zero decreased from 2000-2018over the last 18 years.

Now that the Biden administration has announced the student debt relief plan, which will include relief for Parent PLUS borrowers, Black families are most likely to be positively impacted.

The majority of Parent PLUS borrowers are also Pell Grant recipients, who will receive up to $20,000 in debt cancellation under the new plan.

While it's too soon to tell just how many of these families are impacted and how debt relief will change future wealth and savings outcomes, it's clear that some positive change for these communities is near.