Parent Loan Fix Led to Declines in Black Student Enrollment

Parent Loan Fix Led to Declines in Black Student Enrollment

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This story was written by Jill Barshay, a contributing editor at the Hechinger Report, where it originally appeared. It is reprinted here with permission.

The number of black students enrolled at four-year universities and colleges across the United States declined in 2012—13, a year after the federal government tightened credit standards for issuing loans to parents. The declines for black students were greater than declines of students of other races and ethnicities, according to a quantitative analysis conducted for the U.S. Department of Education’s research arm and published April 14, 2015.

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Historically black colleges and universities, where black students make up more than 80% of the student body, were particularly hard hit. The number of recipients of federal parent loans fell 46%, compared with a 29% drop at other colleges that educate students from low-income families.* The steep fall in college loans coincided with a 3.4% drop in the number of students enrolled at historically black schools, a loss of almost 100 students per institution on average.

Throughout the United States, universities that serve low-income student populations saw a 1.5% drop in black students, on average, or about 12 fewer black students per institution. Universities and colleges that serve higher-income students saw a 0.6% drop in black students, on average, or about three per institution.

“This is a tough, touchy issue,” said Rachel Fishman, a policy analyst at the New America Foundation. “I agree the numbers don’t look good and you’re turning off access to higher education. But these loans were saddling low-income parents with debt they couldn’t afford to repay.”

Better types of loan programs are being debated but haven’t yet been created. As it stands now, the federal government caps the amount of money that undergraduates can borrow each year, and these maximum amounts are often not enough to pay for college. Many students turn to their parents, who are allowed to borrow the full cost of attendance under the federal Parent Loans for Undergraduate Students or PLUS program. With soaring tuition, this parent loan program has become a major source of college financing. Thirteen percent of all dependent undergraduates have parents who have taken out PLUS loans. Each loan averages almost $13,000 a year.

Default rates grew alarmingly high on these parent loans. And in 2011 the federal government quietly changed its underwriting standards and began denying PLUS loans to parents who had marred credit histories. A delinquent mortgage payment or medical bill during the financial crisis would have been reason to deny a loan. Denials spiked, especially among black families. Historically black colleges saw the impact immediately, and complained.

A group of these colleges asked a regional unit of the Institute of Education Sciences, the Education Department’s research arm, to calculate exactly what the consequences were. The result is this analysis, Changes in financial aid and student enrollment at historically Black colleges and universities after the tightening of PLUS credit standards, conducted by Mathematica Policy Research.

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