How the Gov’t Is Saddling Parents with College Loans They Can’t Possibly Afford

The Education Department says its priority is making sure college choice isn't just for the wealthy. Families have to make tough decisions about their own finances, says Justin Hamilton, a spokesman for the department. We "want folks to have access to capital to allow them to make smart investments and improve their lives," Hamilton says. In the years after the credit crisis, department officials point out, other means of financing college — such as home-equity loans and private student loans — have become harder for families to get.

The department says it's trying to pressure colleges to contain costs, and working to inform students and families of their financing options. "Our focus is transparency," says Hamilton. "We want to make sure we're arming folks with all the information they need."

Colleges' Tricky Role

Colleges rarely advise families on how much is too much. After a student's own federal borrowing is maxed out, financial-aid offices often recommend large Plus loans for parents.

Using Education Department data, The Chronicle and ProPublica took a closer look at colleges where borrowers took out the highest average Plus loan amounts per year. ( See a breakdown of the top schools.) NYU ranked 11th, with an average annual loan of $27,305. The university generally gives students  less financial aid than many of its peers. Last year, parents of NYU students borrowed more than $116 million through the Plus program, the second-largest sum taken on for a single university, trailing only Penn State University's $160 million.

"Our first suggestion is the Plus loan," says Randall Deike, vice president for enrollment management at NYU. Yet he has misgivings about the program. "Getting a Plus loan shouldn't be so easy," he says.

David Palmer is chief executive at the for-profit New York Conservatory for Dramatic Arts, where parents who borrowed through the Plus program took out an average of $27,432 in loans last year. (Mark Abramson for The Chronicle)

Among the top 25 institutions with the largest average Plus loans, more than a third focus on the arts. Tenth on the list is New York Conservatory for Dramatic Arts, a for-profit acting school. The school's sticker price for the current year adds up to  nearly $53,000 for a year's worth of tuition, fees, room, board, and other expenses. Without an endowment, says David Palmer, the conservatory's chief executive, the school can't provide much financial aid — so families are often left to make difficult decisions about how borrowing is too much. Ideally, families would have saved for college, according to Palmer, but often tuition payments come in the form of Plus loans.

"It doesn't make me feel great, truthfully," Palmer says. "But then again, what can I do? We have to pay our bills."

Last year, 150 parents borrowed for their children to attend the institution of 330 undergraduate students. Palmer knows that sometimes families borrow too much, and students have to drop out. "It makes me sick to my stomach," he says. "Because they've got half an education and a mountain of debt."

Still, he says, "I don't know that it's the institution's responsibility to say we'll take a glimpse of what your individual situation is and say maybe this isn't a good idea."

To the dismay of consumer advocates, some universities lay out offers of tens of thousands of dollars in Parent Plus loans directly in the financial-aid packages of prospective students — often in the exact amount needed to cover the gap between other aid and the full cost of attendance. That can make it look like a family won't have to pay anything at all for college, at least until they read the fine print. The offers are often included in financial-aid packages even for families who clearly can't afford it.