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

"It is deceptive," says Greg Johnson, chief executive of Bottom Line, a college access program in Boston and New York. His organization's counselors have seen firsthand how students and families can get confused: When Agostinha Depina first got her financial aid award letter from New York's St. John's University, her first choice, she was excited. But upon taking a closer look at the package with her counselor at Bottom Line, she realized that a $32,000 gap was being covered by a Parent Plus loan that her parents would struggle to afford.

"It made it seem like they gave me a lot of money," says Depina. In reality, "it was more loans in the financial-aid package than scholarship money." Depina, 19, opted to go to Clark University, where she had a smaller gap that she covered with a one-year outside scholarship. A spokeswoman for St. John's did not respond to requests for comment.

There's considerable debate among financial-aid officials about whether and how to include Plus loans in students' financial-aid award letters. Some universities opt not to package in a loan that families might not qualify for or be able to afford. Instead, they simply provide families with information about the program.

"We inform them about the different options they have, but we wouldn't go in and package in a credit-based loan for any family," says Frank Mullen, director of financial aid at Berklee College of Music. "To put a loan as part of someone's package without knowing whether they'd be approved? I just wouldn't feel comfortable with it."

Others say it isn't so simple. "This is one of those knives that cuts both ways," says Craig Munier, director of scholarships and financial aid at the University of Nebraska at Lincoln.

"If we leave a huge gap in the financial-aid package, families could reach the wrong conclusion that they cannot afford to send their children to this institution," says Munier, who is also chair-elect of the National Association of Student Financial Aid Administrators. "The other side," he says, "is we package in a loan they can't afford, and they make a bad judgment and put themselves into debt they can't manage. You can second-guess either decision."

For parents in exceptional circumstances, colleges have some discretion to bypass the Plus application process and give a student the additional amount of federal student loans that would be available in the case of a Plus denial — up to $5,000. Those are judgment calls, says Justin Draeger, president of the aid administrators' group. Cases of a parent who is incarcerated or whose only income is public assistance are more straightforward, but the prospect of evaluating a parent's ability to pay is fraught. Deciding to tell them what they can afford "leaves the schools in sort of a moral dilemma," Draeger says.

But encouraging Plus loans for parents who would struggle to repay them lets colleges shirk their own responsibility to help families with limited means, says Simon Moore, executive director of College Visions, a college-access program based in Rhode Island. "Colleges can say, 'We want to enroll more low-income students,' but don't really need to step up and offer students good aid packages," he says. Plus loans "offer colleges an easy way to opt out."

The Middle Class Struggles to Repay

Some parents who have borrowed through Plus have found themselves working when they could be retired, and contemplating whether to pay off the debt by raiding their retirement nest eggs.

Galen Walter, a pharmacist, has put three sons through college. All told, the family racked up roughly $150,000 in loans, about $70,000, he estimates, in the Parent Plus program.