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Access to what and for whom? A closer look at Federal Parent PLUS loans.

Note of Correction

May 7, 2014

The merging of IPEDS data and financial data reported by the Office of Federal Student Aid is complex. The main issue is the way in which Parent PLUS loan disbursements are reported in the data from the Office of Federal Student aid. Most of the time, these disbursements are reported at the level of the individual campus. But in other cases, the loan disbursement data are only reported at the university system level, obscuring the disbursements to individual campuses. For example, the FFEL files report the Parent PLUS loan disbursements for the entire Rutgers University system, not just Rutgers New Brunswick, the flagship campus. However, there is no way to unpack the figures found in the FFEL file to find out how much Rutgers Camden or Rutgers Newark received in PLUS as compared to Rutgers New Brunswick. At the same time, other systems are reported separately by campus (e.g., the University of Wisconsin). This inconsistency is a limitation of the data, and led to a small number of inaccuracies in the first section of this report. The overall patterns and findings remain unchanged.

In order to remedy the inconsistency, for those institutions that were grouped at the system level but reported individually in IPEDS, I calculated system-wide graduation rates, net price, and out-of-state enrollments (there were five on the list in Table 1). For example, the graduation rate listed for the Rutgers system is a weighted graduation rate calculated across all three Rutgers campuses. Table 1 of the report has been changed in order to better characterize the system to which PLUS dollars are going.

One of the thorniest ways that a family can pay for college is through the use of federal Parent PLUS loans. The Parent PLUS loan program provides unsubsidized loans to any parent on behalf of their child up to the cost of attending college (including living expenses) and after accounting for all other student aid. (1) The student must be a dependent and enrolled at least half time in college. Additionally, parents have to pass a credit check in order to qualify for a loan; if they have had any outstanding debts in the past 90 days or delinquent accounts within the past 5 years, the government will not furnish the loan. (2)

What distinguishes Parent PLUS loans from other federal loans is that interest rates are higher than on undergraduate student loans (6.41 percent versus 3.86 percent); (3) payments begin immediately after funds are disbursed; and parents have a limited set of repayment options (usually just standard, extended, or graduated). (4) And just like other federal loans, they are nearly impossible to discharge in bankruptcy. Unlike co-signing on a student loan, where parents may be on the hook if the student falters in their payments, Parent PLUS loans are a debt incurred strictly by parents.

Despite their less-than-ideal terms, PLUS loans have become an increasingly popular financial tool as college tuitions soared and college financial aid packages failed to keep pace. At the program's peak in 2011, there were just shy of a million borrowers and $11 billion in disbursements. (5) The downside to the growth in PLUS loans is that some families have borrowed more than they can repay. In fact, there has been a steady uptick in the rate of parents defaulting on their PLUS loans (from 1.8 percent of borrowers in 2006 to 4.1 percent in 2010), especially in the for-profit sector where 11.8 percent of parents who borrowed in 2010 had defaulted by 2013. (6)

Proponents of the Parent PLUS program assert that many students would not be able to gain access to a postsecondary education without the assistance of these loans. One report advocating for greater access to the program notes that "PLUS Loans have become especially important for low-income parents at [Historically Black Colleges and Universities] as other forms of credit have been squeezed off the market." (7) For some, access to college and access to Parent PLUS loans are synonymous. The U.S. Department of Education's (ED) Acting Under Secretary Jamienne Studley characterizes ED's precarious stewardship of Parent PLUS as providing "access to higher education, while also acknowledging [ED's] legal obligation and duty to determine borrower eligibility." (8)

These tensions have never been more evident than when ED tightened the underwriting criteria for Parent PLUS in 2011. When ED made the definition of credit-worthy more stringent, more parents were denied PLUS loans. Recently released figures from ED show that 40 percent of parents who had their credit histories checked were declined in 2013-14, up from 22 percent in 2010-2011. (9) Without parent loans to bridge the financial gap between what families can pay out of pocket and the cost of attendance, enrollments at many institutions dropped. In turn, the drop in tuition revenue forced affected colleges to consider cost-cutting measures like reducing staff to make ends meet. (10) The uproar swelled to a national crescendo, causing ED Secretary Arne Duncan to issue an apology to families for not being transparent enough about cutting off the large supply of federal funds. (11)

Researchers, institutions, and advocacy groups have all weighed in. (12) However, much of the debate around Parent PLUS has taken place in the absence of empirical data about the program. Simply put, Parent PLUS has been grossly understudied as a financial aid tool, in large part because data are lacking on the characteristics of PLUS borrowers and the schools they attend. Critical questions remain: what exactly are students gaining access to with these loans? Where is this loan money going? Which families are taking out Parent PLUS loans? Combining several existing federal datasets, this report seeks to fill in some of these information gaps and advance our understanding of the Parent PLUS Loan program. (13)

This report is divided into two sections. First, I examine the types of colleges that benefit from Parent PLUS loans, both in terms of overall volume and their relative reliance on the program as a source of revenue. In the second section, I consider the types of families who are borrowing. I then close with a discussion of the policy implications of these findings.

Part I. The Colleges that Rely on PLUS

Parents who take on Parent PLUS debt make an implicit assumption: they are investing in a college that will help their child earn a degree and have a successful career. However, we know little about the types of colleges where students enroll with the help of PLUS loans. What is more, there has been little discussion about whether these colleges deliver on their promise to help students successfully earn a degree and do so at an affordable price.

Since the narrative around preserving parents' ability to borrow has been increasingly framed around access, I sought to better understand how Parent PLUS borrowing stacks up against contemporary measures of institutional quality. We want to invest our dollars in colleges where (1) students are likely to graduate, and (2) leaders have made an effort to keep tuition prices under control. The following section examines where most of the PLUS disbursements are going, and whether PLUS dollars and recipients are going to colleges that are affordable and have high graduation rates, especially for those colleges that rely most on Parent PLUS.

Because of well-known data limitations, graduation rates and net price are imperfect as currently measured, but provide a consistent measure across time. I define affordability as the change in net price between 2009 and 2012. I do not focus on net price alone because the majority of students that use Parent PLUS enroll at institutions with high net price (thus the reliance on PLUS). For example, of the colleges in this report, only 6.5 percent of Parent PLUS recipients went to colleges included in this report where the net price was below $10,000.

A large share of Parent PLUS loan disbursements go to a few institutions and many out-of-state students.

Of those institutions that received Parent PLUS loan monies in 2012-2013, 30 colleges (less than 1 percent of all institutions that received PLUS) received 17 percent of all Parent PLUS loan disbursements and 14 percent of recipients (Figure 1). Many of these institutions are large public flagship colleges with enrollments in the tens of thousands (see Appendix B). With so many students on their rosters, it may be unsurprising that they top this list. But from the perspective of parent borrowers, are these institutions to which so many PLUS dollars are flowing a good deal for students and families?

Although their affordability varies, 4 out of every 5 colleges have a graduation rate over 60 percent (see Table 1, pg. 4). More importantly, many of these colleges have high shares of out-of-state students-- especially public institutions. (14) These patterns suggest that PLUS loans are mitigating the high cost of attending a flagship campus for out-of-state students; enabling students to cross state borders; and, at the same time, helping state colleges raise additional tuition revenue. These out-of-state students are more likely to come from families with high-income and college-educated parents. (15) However, it is difficult to say with certainty, as ED has not released information on who goes out-of-state and bow much PLUS they borrow to do so.

A sizable proportion of PLUS loans go to colleges with low graduation rates.

What about the other institutions? Over a quarter of PLUS loan recipients (188,625 students) and one-fifth of PLUS dollars ($2.0 billion) in 2012-13 went to colleges with graduation rates lower than 50 percent (see Figure 2). While this is hardly the majority of loan disbursements, it is still a sizeable share of money going to fund students at colleges where their chances of success are lower than a coin flip.

Low rates of student completion are one problem; the growing cost of attendance is another. The amount that parents are eligible to borrow is tied to the cost of attendance, and parents can borrow unlimited sums with no lifetime limit. What do the data suggest? Figure 2 shows that a quarter of students and PLUS dollars went to institutions where the three-year change in net price exceeded 10 percent after adjusting for inflation. This does not bode well for families. As the cost of going to college continues to climb, it's likely that Parent PLUS loans, not grant aid, will increasingly fill in the gaps.

Of the four-year colleges that rely the most on Parent PLUS, few have high graduation rates and most have increased their net prices above inflation.

The backlash against ED's tightening of Parent PLUS eligibility illustrated bow reliant some schools are on these loan dollars. For PLUS-reliant colleges, the absence of PLUS could mean a decline in student enrollments and a drop in tuition revenue, thereby jeopardizing the fate of the institution. I looked at a college's reliance on PLUS in two ways (1) the share of families borrowing PLUS and (2) the average size of the PLUS loan that parents borrow. Reliance on PLUS can look different across institutions, but the least desirable scenario would be institutions that ask a large share of their families to borrow large sums of PLUS loans. Two things that, until now, bad been unclear are the extent to which some colleges rely on PLUS--in both the share of students or amount of loans--and whether or not these colleges have high graduation rates.

In order to better understand this, I calculated the share of students at four-year colleges whose parents used PLUS loans and the average amount of PLUS loan for those who bad to borrow at each four-year college. For each college, I defined high PLUS reliance as colleges where more than 12 percent of students' parents used PLUS and the average PLUS loan amount was more than $15,000 (roughly the 75th percentile for the distribution of four-year colleges, see Appendix A for details). A breakout of all four-year colleges by their reliance on PLUS is included in Appendix B. Disturbingly, there are 172 four-year institutions (mostly private not-for-profit and for-profit) that have high shares of students borrowing large PLUS loan amounts (10 percent of all four-year institutions in the sample). I then shaded two pie charts to show the share of these PLUS-reliant institutions by (1) graduation rates and (2) change in net price.

What Figure 3 demonstrates is that the four-year colleges that are most reliant on Parent PLUS are a mixed bag when it comes to graduation rates and changes in net price. Yet, of these colleges that ask a lot of parents to take on large debts, many do not have high graduation rates and many have increased their net price of attendance faster than inflation.

Taken together, these analyses show that many families are not using Parent PLUS loans to gain access to institutions one might deem high performing. Instead, many of the institutions are of either middle or low performing. In far too many cases, the implicit assumption that parents make in taking out a PLUS loan--that the extra debt will help their child earn a degree--might not bold.

Part II. Equal Opportunity Borrowing

In addition to the types of institutions that rely on PLUS, we are also interested in the kinds of families who are using this type of loan. For this section, I used data from the National Postsecondary Student Aid Study (NPSAS:12) to look at characteristics of Parent PLUS borrowers (see Appendix A for details).

Just how many parents rely on Parent PLUS to finance their children's postsecondary education? In the 2011-2012 academic year, about 13.8 percent of undergraduate students had parents who borrowed PLUS loans on their behalf. On average, the parents of undergraduates who borrowed accumulated $19,310 in Parent PLUS loans. (16)

And all types of families are borrowing (Figure 4). Perhaps with the exception of families in the lowest income quartile, the share of families borrowing Parent PLUS is remarkably similar across income, parental education, and marital status. Differences arise in the amounts they borrow; two-parent households that are more affluent and college educated take out larger loans, on average. This is expected given that they are less likely to qualify for need-based aid.

Among those families who borrow, what proportion of total aid is made up of Parent PLUS loans? A surprisingly large share, it turns out. On average, PLUS made up one-third to over a half of the aid that students received (Figure 4, third column), regardless of income, parental education, or marital status. These figures also vary by sector, with families at for-profits borrowing at the highest rates and in most cases PLUS being the largest share of financial aid students receive, while families at private four-year not-for-profits are borrowing the largest amounts of PLUS, on average (see Appendix C).

Many of the parents who are borrowing come from the bottom half of the income distribution and have never been to college themselves. Consider this: 42 percent of parents in the NPSAS sample who borrowed PLUS loans in 2011-2012 were in the bottom half of the income distribution, and 43 percent did not have a college degree themselves (Figure 5). This observation suggests that parents deem the Parent PLUS loan necessary in securing their child's enrollment at a particular institution, supporting the matriculation of their child's position into the middle class--even if the trade-off means jeopardizing their own financial security.

Moreover, 31 percent of the students whose parents are PLUS borrowers are from single-parent households. Arguably, single-parent households have less of a financial cushion and are therefore more susceptible to financial shocks that could lead to default. Unfortunately, these households have become increasingly reliant on Parent PLUS loans over the last decade.

So, what types of families utilize Parent PLUS loans? The short answer: all types, whether they are well-positioned to pay it off or not. Inevitably, the recent increase in underwriting standards resulted in an increase in rejections, presumably for the most financially vulnerable populations. Since these loans allow students to enroll at institutions they would find difficult to afford otherwise, many see this as a restriction in access. However, while families of varying degrees of ability to pay are borrowing, not everyone is getting access to the same quality of institution (if we measured it by graduation rates and change in net price). Next, we will look at where students from different backgrounds are going with their Parent PLUS dollars.

Different families are using Parent PLUS loans to attend different types of institutions.

In light of the well-documented stratification in higher education by family background, it should come as no surprise that different types of families are using PLUS loans to attend very different types of institutions. (17) In other words, lower-income and first-generation students are more likely to enter postsecondary at two-year institutions and less selective colleges. Many of these institutions also tend to have lower graduation rates and fewer resources. (18)

A frequent proxy for quality--accurate or not--is an institution's selectivity. More selective schools are often accompanied by a steep sticker price and varying levels of grant aid. Low-income and first-generation students are less likely to use PLUS dollars to fill the gap in affordability at these schools than their peers from high-income or college-educated homes because they are more likely to enroll at minimally selective and open admission four-year colleges, for-profits, or two-year institutions (see Figure 6). In contrast, the high income families and families with advanced degrees are much more likely to use PLUS to send their students to very or moderately selective institutions thereby enrolling at institutions with higher graduation rates and greater resources.

Parent PLUS borrowers are not monolithic, and neither are the institutions to which their PLUS dollars are gaining their students access. Unfortunately, we are unable to directly test graduation rates with PLUS use. However, through the proxy of selectivity, the data suggest that student enrollments mimic existing patterns of stratification by family background, with the most vulnerable populations borrowing in order to enroll their children at institutions that are least likely to produce a college graduate. As a result, many parents that have limited experience with postsecondary (and even some that do) are using PLUS loans to purchase a product of questionable return. For this reason, folks are dubbing Parent PLUS the new subprime mortgage that lead the financial ruin of many families who borrowed beyond their means. (19) This makes the government's role of protecting families and federal dollars from institutions that do not perform even more important.

Conclusion

By unpacking where the money is going and who it's going to, this report contributes to the current policy discussions about the Parent PLUS program with novel analyses of PLUS borrowers and institutions. There are four major takeaways from these analyses, none of which are good news for borrowers.

1. Most families who use PLUS loans are not gaining access to institutions with high graduation rates.

Proponents of the PLUS program have accused ED of restricting access to higher education by restricting access to PLUS loans, which is not the same thing. However, few have questioned what precisely families are gaining access to. The analyses in this report (Figures 2 and 3) shows that families are only occasionally using this line of credit to enroll at colleges that have high graduation rates or are increasingly affordable. Disturbingly, many of the colleges that ask a large share of parents to take out large PLUS loans may not deliver. In many cases, students whose parents take out PLUS loans will leave without a degree (and potentially their own debts to tend to), leaving parents with thousands of dollars of debt and little to show for it.

For however contentious the proposed college ratings plan may be, if ED is considering performance-based funding, PLUS should be a part of it. This report only considered graduation rates and changes in net price. Imagine if we knew institution-level Parent PLUS default and completion rates. What holds families back from PLUS should not only be poor credit history, but also poor performance on the part of the schools in their ability to produce college graduates.

2. Institutions are being rewarded for increasing tuition.

As institutions and families lobby to preserve their reliance on PLUS, very few are pointing to institutions' role in exacerbating the rising cost of college. Because parents can borrow up to the cost of attendance, institutions can continue to increase prices knowing parents can cover the difference with PLUS. Ultimately, the onus of making college affordable is being placed squarely on families while many institutions continue to meet their tuition revenue benchmarks. This is most clearly seen in Figure 2, where the bulk of PLUS monies are being directed to institutions that have increased net price beyond inflation. Curtailing the use of PLUS would force institutions that rely on PLUS to find alternate means.

Analyses provided in this report support the recommendation of caps on PLUS borrowing, as previously advocated for by others. (20) This means that colleges could not keep increasing their cost of attendance without acknowledging the financial realities of the families they purport to serve.

3. Parents are not using PLUS to finance the same educational experiences.

While all types of families are borrowing PLUS loans, the program falls short from being an equalizing force. Families that are traditionally underrepresented in higher education are using PLUS loans primarily to get their foot in higher education's door. Many of them are sending their children to institutions that are four-year but minimally selective, associate's level, or not even degree granting--a sizeable share of these institutions has middling-to-low graduation rates and minimal resources. This is problematic when also considering that these are the most vulnerable of populations that are burdening themselves with what could end up being several hundred dollars a month in payments. In the end, having the families that can least afford to take out debt for institutions that may not graduate their children is not access.

On the other hand, families that are more financially privileged are using PLUS to reinforce their social position, sending their children to institutions that are more selective, with greater resources, and higher graduation rates. Unfortunately the lack of available data makes it impossible to test the relationship between family income and institutional graduation rates directly, but instead through the use of proxies like institutional selectivity. It also appears that these families are potentially using PLUS to send their children to premiere public institutions that are out-of-state. For these families, PLUS may be less about access to higher education and more about access to their school of choice.

4. ED needs to collect and report better data on the PLUS Program.

Only by cobbling together existing datasets can we document the most basic of trends around who uses Parent PLUS and where the money goes. Much of the debate around the PLUS loan program has been based on the impassioned stories of a few students and institutions, rather than empirical analyses. Part of the problem lies in the dearth of access to good data on the PLUS program. The charts and tables above represent our best effort to estimate answers to some of these questions, but the methods are by no means perfect. ED should provide the restricted-use student-level data that policymakers and researchers need in order to have informed discussions about Parent PLUS policy evaluation and reform. Most importantly, ED has the ability to place valuable information into the hands of parents before they risk their financial livelihoods.

The aim of this report was to place Parent PLUS borrowing in the context of outcomes. Based on a sample of students who started college in 2003, it turns out that there is practically no difference between families who borrowed and those that did not when it comes to their child getting a degree in six years, whether it was a public, private not-for-profit, or for-profit four-year institution. (21) Does this differ by income levels? What about at different borrowing levels? How much PLUS money went to noncompleters? Are students whose parents are turned away from Parent PLUS still enrolled in college? More and better data could get us more and better answers.

Parent PLUS sits at the intersection of some of the most complex challenges higher education faces: stratification, cost, and quality. As the negotiated rulemaking sessions move forward, policymakers are urged to consider what the consequences of relaxing the underwriting criteria and increasing access to Parent PLUS loans would (not) do for college access and affordability.

Appendix A. Methodology

Institutional PLUS Loan Volumes. I used the Title IV Program Loan Volume Report for the 2012-2013 Academic Year report from the office of Federal Student Aid to identify which institutions have the largest Parent PLUS loan disbursements (the Award Year Summary tab in FFEL Loan Volume AY 2012-13 Q4). (22) The report details the number of students at each institution whose parents received Parent PLUS loans, as well as the total amount disbursed to each institution. I also added each institution's graduation rate, full-time equivalent enrollment, and net price from the Integrated Postsecondary Education Data System (IPEDS) 2012 Survey Files. I restricted the data to institutions that had unique IPEDS unitids, had PLUS recipients in the 2012-13 academic year, were not foreign institutions, and had the corresponding graduation, net price, and enrollment information in IPEDS data files (see below). This resulted in 3,781 institutions. Analyses that use net price use slightly fewer institutions (N = 3,738).

I calculated several variables. First, I derived the average amount of PLUS borrowed by dividing the total amount of PLUS dollars disbursed to the school by the number of recipients. A measure of institutional reliance on PLUS was estimated by dividing the number of recipients by the full-time equivalent counts. Because students do not need to be full-time to receive PLUS, this ratio could be larger than 1. I therefore top-coded this measure so that all values greater than 1 were set to 1. I then calculated the change in net price from 2009 to 2012, using the net price found in IPEDS 2009 survey files, adjusting for inflation using the consumer price index (CPI) (23). This makes 2009 figures comparable to 2012 dollars. Further, I classified institutions by their graduation rates, reliance on PLUS, and change in net price as "low," "middle," or "high," with the criteria detailed in Appendix A Table 2.

Student Characteristics: In order to better understand the demographic characteristics of families who have borrowed Parent PLUS loans, I used data from the National Postsecondary Student Aid Study (NPSAS), a federal postsecondary dataset that contains detailed information about student financial aid information along with demographic information about students and families. Analyses were performed through the PowerStats website (https://nces.ed.gov/datalab/). The dataset provides a snapshot of undergraduates enrolled in postsecondary education in the 2011-12 academic year, their financial aid circumstances, and the characteristics of the institutions in which they are enrolled. Because Parent PLUS loans can only be acquired by dependent students' parents, these figures only reflect dependent students.

Appendix A Table 1. Criteria used to restrict the universe of
institutions.

Criteria                                             Institution Count

All institutions found in FFEL Loan Volume file,     5,637
2012-13
  has unique IPEDS unitid                            5,602
  has PLUS recipients > 0                            4,196
  not a foreign institution                          4,007
  graduation rate found in IPEDS                     3,781
  net price and enrollment reported in IPEDS         3,738

Sources: FFEL Loan Volume AY 2012-13 Q4 Award Year Summary;
IPEDS 2012 Survey Files

Appendix A Table 2. Criteria for "low" and "high" benchmarks for
graduation rates, reliance on PLUS, and change in net pricea

Measure                          "Low" criteria     "High" criteria

Graduation rate (b)              Below 50 percent   Above 75 percent,
                                                      inclusive
Share of FTE receiving           Below 4 percent    Above 12 percent,
  PLUS (c)                                            inclusive
Average PLUS loan amount (d)     Below $5,465       Above $15,000,
                                                      inclusive
Change in Net Price (e)          Below 1 percent    Above 10 percent,
                                                      inclusive

Notes: (a) Data were restricted to institutions that are not foreign,
have unique IPEDS unitids, have PLUS recipients > 0, and not missing
graduation, net price, or enrollment information in IPEDS. (b) The
lower graduation rate cut-off was determined based on having at least
a 50 percent chance of graduating. The "high" cutoff was determined as
a reasonably good chance of graduating, (c) Cut-offs for this measure
were determined using the 25th and 75th percentiles of the
distribution for "low" and "high," respectively, (d) The "low" cutoff
is roughly 5th percentile for four-year institutions "high" cut-off is
roughly the 75th percentile of all four-year institutions, (e) The
"low" cut-off in the change in net price was established as no change
in net price, since the 2009 figure was adjusted to 2012 dollars. This
would mean that institutions effectively made no change in the average
amount students pay out-of-pocket. The "high" cut-off reflects the
75th percentile.

Appendix B. Four-year institutions classified by average amount of
Parent PLUS loan and share of FTE with PLUS

                                             Average Amount of PLUS

Share of FTE with PLUS                        low           middle

low               Institutions, count              84             407
                  Institutions, percent         4.69%          22.71%
                  Disbursement, dollars   $11,825,504    $563,922,650
                  Disbursement, percent         0.13%           6.43%
                  Recipients, count             2,516          55,786
                  Recipients, percent           0.41%           9.07%

middle            Institutions, count             18               605
                  Institutions, percent        1.00%            33.76%
                  Disbursement, dollars   $7,615,147    $2,827,318,939
                  Disbursement, percent        0.09%            32.25%
                  Recipients, count            1,544           246,002
                  Recipients, percent          0.25%            40.01%

high              Institutions, count              1               221
                  Institutions, percent        0.06%            12.33%
                  Disbursement, dollars     $142,812    $1,086,959,102
                  Disbursement, percent        0.00%            12.40%
                  Recipients, count               27            93,355
                  Recipients, percent          0.00%            15.18%

                                          Average Amount of PLUS

Share of FTE with PLUS                             high

low               Institutions, count                         46
                  Institutions, percent                    2.57%
                  Disbursement, dollars             $260,015,331
                  Disbursement, percent                    2.97%
                  Recipients, count                       12,451
                  Recipients, percent                      2.02%

middle            Institutions, count                        238
                  Institutions, percent                   13.28%
                  Disbursement, dollars           $2,430,566,764
                  Disbursement, percent                   27.72%
                  Recipients, count                      123,901
                  Recipients, percent                     20.15%

high              Institutions, count                        172
                  Institutions, percent                    9.60%
                  Disbursement, dollars           $1,579,017,811
                  Disbursement, percent                   18.01%
                  Recipients, count                       79,328
                  Recipients, percent                     12.90%

Notes: Data were restricted to institutions that are not foreign, have
unique IPEDS unitid, have PLUS recipients > 0, and not missing
graduation, net price, or enrollment information in IPEDS.

Sources: FFEL Loan Volume AY 2012-13 Q4 Award Year Summary; IPEDS 2012
Survey Files

Appendix C. Parent PLUS loan borrowing by family characteristics and
sector, 2011-12

                                                      Share borrowing
                                                           PLUS

Public 4-year                0 to 25th percentile           9.6
                Parental     26 to 50th percentile         16.1
                income       51 to 75th percentile         18.6
                             76 to 99th percentile         17.3

                             HS or less                    13.6
                Parental     Sub-Baccalaureate             17.8
                education    Bachelor's degree             16.3
                             Advanced degree               15.1

                Marital      Single parent                 14.8
                status       Married/remarried             16.1

Private                      0 to 25th percentile          21.2
nonprofit       Parental     26 to 50th percentile         26.1
4-year          income       51 to 75th percentile         26.6
                             76 to 99th percentile          19

                             HS or less                    27.5
                Parental     Sub-Baccalaureate             31.3
                education    Bachelor's degree             22.7
                             Advanced degree               16.2

                Marital      Single parent                   22,9
                status       Married/remarried             23.1

Private                      0 to 25th percentile          24.8
For-Profit      Parental     26 to 50th percentile          34
                income       51 to 75th percentile         43.8
                             76 to 99th percentile         32.6

                             HS or less                    29.8
                Parental     Sub-Baccalaureate             34.4
                education    Bachelor's degree             35.3
                             Advanced degree                25

                Marital      Single parent                 26.1
                status       Married/remarried             36.8

                                                     Cumulative amount
                                                       of PLUS loans
                                                        to parents

Public 4-year                0 to 25th percentile         $10,346
                Parental     26 to 50th percentile        $13,541
                income       51 to 75th percentile        $17,888
                             76 to 99th percentile        $23,038

                             HS or less                  $13,232
                Parental     Sub-Baccalaureate           $16,494
                education    Bachelor's degree           $117,489
                             Advanced degree             $21,641

                Marital      Single parent                $14,198
                status       Married/remarried            $18,859

Private                      0 to 25th percentile         $13,766
nonprofit       Parental     26 to 50th percentile        $20,659
4-year          income       51 to 75th percentile        $26,445
                             76 to 99th percentile        $36,881

                             HS or less                  $20,171
                Parental     Sub-Baccalaureate           $23,365
                education    Bachelor's degree           $27,197
                             Advanced degree             $31,726

                Marital      Single parent                $20,489
                status       Married/remarried            $27,676

Private                      0 to 25th percentile         $12,197
For-Profit      Parental     26 to 50th percentile        $18,334
                income       51 to 75th percentile       $17,400
                             76 to 99th percentile        $23,105

                             HS or less                 $13,884.00
                Parental     Sub-Baccalaureate           $17,155
                education    Bachelor's degree           $19,947
                             Advanced degree             $20,143

                Marital      Single parent                $15,315
                status       Married/remarried            $17,350

                                                         PLUS as a
                                                      percent of Aid

Public 4-year                0 to 25th percentile          33.5
                Parental     26 to 50th percentile         43.0
                income       51 to 75th percentile         54.1
                             76 to 99th percentile         59.3

                             HS or less                    47.0
                Parental     Sub-Baccalaureate             48.6
                education    Bachelor's degree             52.6
                             Advanced degree               54.7

                Marital      Single parent                 44.1
                status       Married/remarried             53.4

Private                      0 to 25th percentile          28.0
nonprofit       Parental     26 to 50th percentile         34.2
4-year          income       51 to 75th percentile         41.5
                             76 to 99th percentile         48.3

                             HS or less                    36.5
                Parental     Sub-Baccalaureate             39.6
                education    Bachelor's degree             39.4
                             Advanced degree               42.2

                Marital      Single parent                 36.1
                status       Married/remarried             40.7

Private                      0 to 25th percentile          34.8
For-Profit      Parental     26 to 50th percentile         48.1
                income       51 to 75th percentile         60.1
                             76 to 99th percentile         61.4

                             HS or less                    42.7
                Parental     Sub-Baccalaureate             51.2
                education    Bachelor's degree             52.1
                             Advanced degree               53.8

                Marital      Single parent                 42.4
                status       Married/remarried             51.6

Notes: Figures reflect dependent students only. Sub-Baccalaureate
category represents parents who have some college, technical/vocational
training, and Associate's degree. Aid Package includes all loans
including PLUS. Private for-profit institutions include four-year and
two-year institutions.

Source: Analysis of NPSAS: 12


Endnotes

(1) U.S. Department of Education, "Parents Applying," Federal Student Aid, http://www.direct.ed.gov/parent.html.

(2) U.S. Department of Education, "Definition of Adverse Credit for Direct PLUS Loan Eligibility," http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/pii-issue6-adverse-credit2014.pdf. Although the proposed plan would relax those standards found here: http://www2.ed.gov/policy/highered/reg/hearulemaking/2014/pii3-issue6- redline041614.doc

(3) U.S. Department of Education, "Calculators and interest rates," Federal Student Aid, http://www.direct.ed.gov/calc.html.

(4) U.S. Department of Education, "Parents Repaying," Federal Student Aid, http://www.direct.ed.gov/parentrepay.html.

(5) Rachel Fishman, "The Parent Trap: Parent PLUS Loans and Intergenerational Borrowing," (New America Education Policy Program, 2014, 3), http://education.newamerica.net/sites/newamerica.net/files/policydocs/Corrected-20140110- ParentTrap.pdf.

(6) U.S. Department of Education, "pii2-PLUS borrowers-cdr," http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/pii2-plusborrowers-cdr.xls.

(7) UNCF, "The Parent PLUS Loan Crisis: An Urgent Crisis Facing Students at the Nation's HBCUs," http://www.uncf.org/sites/advocacy/SpecialInitiatives/ParentsPlus/MediaDocuments/UNCF-Report-THE-PARENT-PLUS-LOAN- CRISIS-3.25.14.pdf.

(8) Jamienne S. Studley, "Negotiated Rulemaking--Program Integrity and Improvement Committee Welcoming Remarks," (U.S. Department of Education, February 19-21, 2014), http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/studley-feb-19-2014.doc

(9) U.S. Department of Education, "pii2-declinationrates," http://www2.ed.gov/policy/highered/reg/hearulemaking/2012/pii2-declinationrates.xls.

(10) Justin Doubleday, "With Parents Denied Loans, Students Scramble at HBCUs," The Chronicle of Higher Education, Oct. 7, 2013, http://chronicle.com/article/Without-Federal-PLUS-Loans/142147/; Mark Washburn, "Johnson C. Smith plan layoffs, budget cuts," The Charlotte Observer, Nov. 1, 2013, http://www.charlotteobserver.com/2013/10/31/4428517/johnson-c-smith-plans-layoffs.html#.Uz2dzhCa9oc; Rachel Fishman, "The Parent Trap: Parent PLUS Loans and Intergenerational Borrowing," (New America Education Policy Program, 2014), http://newamerica.net/sites/newamerica.net/files/events/20140108-ParentTrap-FinalRelease.pdf.

(11) Arne Duncan, "The Enduring and Evolving Role of HBCUs," (Speech, Sep. 26, 2013), U.S. Department of Education, http://www.ed.gov/news/speeches/enduring-and-evolving-role-hbcus.

(12) Congressional Black Caucus, "Education Department Makes Changes to PLUS Loans," Press Release (Aug. 14, 2013), http://cbc.fudge.house.gov/in-the-news/education-department-makes-changes-to-plus-loans/; Rachel Fishman, "The Parent Trap: Parent PLUS Loans and Intergenerational Borrowing," (New America Education Policy Program, 2014), http://newamerica.net/sites/newamerica.net/files/events/20140108-ParentTrap-FinalRelease.pdf; Justin Draeger, "The PLUS Loan Problem," Inside Higher Ed, Aug. 16, 2013, www.insidehighered.com/views/2013/08/16/us-should-change-plus-loan-program-protect-borrowers-and-taxpayers- essay#sthash.lwjBy5X6.dpbs; UNCF, "The Parent PLUS Loan Crisis: An Urgent Crisis Facing Students at the Nation's HBCUs," http://www.uncf.org/sites/advocacy/SpecialInitiatives/ParentsPlus/MediaDocuments/UNCF-Report-THE-PARENT-PLUS-LOAN- CRISIS-3.25.14.pdf; Jason Delisle, "Testimony: Keeping College Within Reach: Examining Opportunities to Strengthen Federal Student Loan Programs," U.S. House of Representatives Committee on Education and the Workforce, March 13, 2013, http://edworkforce.house.gov/uploadedfiles/delisle_written_testimony_.pdf; Justin Draeger, "Testimony of Justin S. Draeger NASFAA President," U.S. House of Representatives Committee on Education and the Workforce Testimony, March 13, 2013, www.nasfaa.org/WorkArea/DownloadAsset.aspx?id=13748.

(13) This report uses data from Integrated Postsecondary Education Data Systems (IPEDS), National Postsecondary Student Aid Study (NPSAS: 12), Title IV Program Volume Reports. See Appendix A for more detailed information on the methodology.

(14) The median percent of first-time undergraduate out-of-state enrollment for public four-years is 8, and 35 for private not-for-profit four-years. Source: U.S. Department of Education, National Center for Education Statistics, "IPEDS Data Center," http://nces.ed.gov/ipeds/datacenter/Default.aspx.

(15) Analysis of NPSAST2 on PowerStats (U.S. Department of Education, National Center for Education Statistics, "PowerStats," http://nces.ed.gov/datalab/powerstats). The distribution was of dependent students who were not going to college in the same state as their legal residence by dependent income quartiles. There were twice as many students from the highest income quartile attending a school outside of their state than the lowest income quartile (36.9 versus 17.4). The distribution was similar by parental education. For example, of the students who went out of state, 35.9 percent of them came from households with advanced degrees, versus 16.9 percent came from households where the parents had never been to college.

(16) Analysis of NPSAS:12 on PowerStats (U.S. Department of Education, National Center for Education Statistics, "PowerStats," http://nces.ed.gov/datalab/powerstats).

(17) U.S. Department of Education, National Center for Education Statistics, "Education Longitudinal Study of 2002: A First Look at the Initial Postsecondary Experiences of the high School Sophomore Class of 2002," http://nces.ed.gov/pubs2008/2008308.pdf; Anthony P. Carnevale and Jeff Strohl, "Separate and Unequal," (Georgetown University, Center on Education and the Workforce, July 31, 2013), http://cew.georgetown.edu/separateandunequal; Danette Gerald and Kati Haycock, "Engines of Inequality: Diminishing Equity in the Nation's Premier Public Universities," (The Education Trust, 2006), http://www.edtrust.org/sites/edtrust.org/files/publications/files/EnginesofInequality.pdf

(18) Frederick M. Hess, Mark Schneider, Kevin Carey and Andrew P. Kelley, "Diplomas and Dropouts: Which Colleges Actually Graduate Their Students (and Which Don't)," (American Enterprise Institute, June 2009), http://www.aei.org/files/2009/06/03/Diplomas%20and%20Dropouts%20final.pdf; Anthony P. Carnevale and Jeff Strohl, "Separate and Unequal," (Georgetown University, Center on Education and the Workforce, July 31, 2013), http://cew.georgetown.edu/ separateandunequal

(19) Marian Wang, Beckie Supiano and Andrea Fuller, "Are student loans the new subprime mortgages?" Salon Media Group, Oct. 7, 2012, http://www.salon.com/2012/10/07/are_student_loans_the_new_subprime_mortgages/; Jill Schlesinger "Student loan debt nears $1 trillion: Is it the new subprime?" CBS News Moneywatch, Nov. 28, 2012, http://www.cbsnews.com/news/student-loan-debt-nears-1-trillion-is-it-the-new-subprime/

(20) Rachel Fishman, "The Parent Trap: Parent PLUS Loans and Intergenerational Borrowing," (New America Education Policy Program, 2014), http://education.newamerica.net/sites/newamerica.net/files/policydocs/Corrected-20140110- ParentTrap.pdf;

(21) Analysis of BPS:04/09 on Powerstats (U.S. Department of Education, National Center for Education Statistics, "PowerStats," http://nces.ed.gov/datalab/powerstats). The comparison was between students whose parents do not borrow PLUS to those who borrowed their first year (in 2003). The outcome was a degree or certificate by 2009 (six years later) from the first institution attended. The analyses were limited to dependent students and were separated by sector.

(22) U.S. Department of Education, Federal Student Aid, "Title IV Program Volume Reports," http://studentaid.ed.gov/about/data-center/student/title-iv.

(23) Bureau of Labor Statistics, "CPI Detailed Report: Data for January 2013," http://www.bls.gov/cpi/cpidl301.pdf.

Awilda Rodriguez (awilda.rodriguez@cLei.org) is a research fellow at the Center on Higher Education Reform at AEI.

Table 1. Top 30 colleges receiving Parent PLUS by disbursement
amount, 2012-13

                                                 Total
                                                  PLUS        PLUS
Institution                   Sector            dollars    Recipients

New York University           Priv NFP 4-Yr     $127.32M       4,146
Arizona State University      Public 4-Yr       $80.14M        4,767
Michigan State University     Public 4-Yr       $75.01M        5,063
University of Illinois at     Public 4-Yr       $73.09M        4,705
  Urbana-Champaign
Saint John's University       Priv NFP 4-Yr     $66.17M        3,031
University of Texas at        Public 4-Yr       $63.15M        4,834
  Austin
Savannah College of Art       Priv NFP 4-Yr     $62.38M        2,132
  and Design
Full Sail University          Private FP 4-Yr   $57.59M        2,341
Purdue University             Public 4-Yr       $56.14M        3,312
West Virginia University      Public 4-Yr       $55.92M        3,915
Depaul University             Priv NFP 4-Yr     $55.44M        2,860
University of Oregon          Public 4-Yr       $51.65M        2,730
Ohio State University         Public 4-Yr       $48.74M        3,643
  (The)
University of Cincinnati      Public 4-Yr       $48.74M        3,800
Columbia College              Priv NFP 4-Yr     $47.77M        2,282
University of Iowa            Public 4-Yr       $47.48M        3,023
University of Southern        Priv NFP 4-Yr     $46.29M        1,794
  California
University of                 Public 4-Yr       $45.57M        3,433
  Missouri-Columbia
University of Arizona         Public 4-Yr       $45.49M        2,635
  (The)
University of Connecticut     Public 4-Yr       $44.48M        3,112
University of Alabama         Public 4-Yr       $43.99M        2,009
Indiana                       Public 4-Yr       $41.21M        2,349
  University-Bloomington
University of                 Public 4-Yr       $40.73M        3,686
  Minnesota-Twin Cities
Colorado State University     Public 4-Yr       $40.65M        2,961
Fashion Institute of          Private FP 4-Yr   $40.16M        1,696
  Design & Merchandising
Rutgers, the State            Public 4-Yr       $39.90M        2,696
  University of New Jersey
Drexel University             Priv NFP 4-Yr     $39.47M        1,470
Temple University             Public 4-Yr       $39.07M        2,617
Howard University             Priv NFP 4-Yr     $38.52M        1,657
Washington State              Public 4-Yr       $37.48M        2,708
University

                               Percent of
                              out-of-state    Change
                               first-time     in net     Grad
Institution                     students      price      rate

New York University                58          3.5%       85
Arizona State University           31         21.0%       57
Michigan State University          11         -12.1%      79
University of Illinois at          10          1.2%       84
  Urbana-Champaign
Saint John's University            35         16.4%       59
University of Texas at             7           4.6%       79
  Austin
Savannah College of Art            68          6.2%       65
  and Design
Full Sail University               60         -9.2%       79
Purdue University                  28         14.1%       69
West Virginia University           56         -1.9%       52
Depaul University                  35          8.9%       68
University of Oregon               40          7.9%       67
Ohio State University              17         15.3%       72
  (The)
University of Cincinnati           12         -4.7%       48
Columbia College                   46         -9.7%       41
University of Iowa                 44          8.7%       70
University of Southern             37          0.4%       90
  California
University of                      35          2.3%       71
  Missouri-Columbia
University of Arizona              34          7.4%       61
  (The)
University of Connecticut          25         10.5%       74
University of Alabama              52         15.1%       67
Indiana                            29         -1.8%       75
  University-Bloomington
University of                      31         -2.5%       73
  Minnesota-Twin Cities
Colorado State University          21         -5.8%       63
Fashion Institute of               37         16.5%       58
  Design & Merchandising
Rutgers, the State                 8           1.6%       76
  University of New Jersey
Drexel University                  48          5.5%       65
Temple University                  19         24.9%       66
Howard University                  96         60.0%       63
Washington State                   10         -0.4%       67
University

Notes: Data were restricted to institutions that are not foreign, have
unique IPEDS unftid, have PLUS recipients > 0, and not missing
graduation, net price, or enrollment information in IPEDS.

Sources: FFEL Loan Volume AY 201243 Q4 Award Year Summary; IPEDS
2009 & 2012 Survey Files

Figure 1. Share of Parent PLUS disbursements to top 30 institutions

30 institutions       $1.6B in PLUS
3,751 institutions    $7.6B in PLUS

Notes: Date were restricted to institutions that are not foreign,
have unique IPEDS unitids, have PLUS recipients > 0, and not missing
graduation, net price, or enrollment information in IPEDS.

Source: FFEL Loan Volume AY 2012-13 Q4 Award Year Summary, IPEDS 2009
& 2012 Survey Files

Note: Table made from pie chart.

Figure 2. Parent PLUS disbursements and recipients by graduation
rates and change in net price, AY 2012-13

Graduation Rates, 2012

                                  Disbursements       Recipients

grad rate < 50%                       22.2%              28.5%
grad rate between 50% and 75%         52.4%              52.3%
grad rate > 75%                       25.4%              19.3%

Change in net price from 2009 to 2012

decrease or no changes                37.5%              39.5%
increase of up to 10%                 36.7%              34.2%
increase > 10%                        25.8%              26.3%

Notes: Data were restricted to institutions that are not foreign,
have unique IPEDS unitid, have PLUS recipients > 0, and not missing
graduation, net price, or enrollment information in IPEDS. The 2009
net price figures were adjusted using CPI.

Source: FFEL Loan Volume AY 2012-13 Q4 Award Year Summary; IPEDS 2009
and 2012 Survey files

Figure 3. Share of four-year colleges with high PLUS reliance
by graduation rate and change in net
price

Graduation Rate

14,079 students
at 31 colleges
with grad rate > 75%
received $289 M in PLUS

15,719 students
at 45 colleges
with grad rate < 50%
received $286 M in PLUS

49,530 students
at 96 colleges
with grad rate between 50% and 75%
received $1,004 M in PLUS

Change in Net Price

18,793 students
at 34 colleges
with grad rate > 10%
in net price
received $395M in PLUS

31,663 students
at 81 colleges
with decrease or no changes
in net price
received $612M in PLUS

28,872 students
at 57 colleges
with increases of up to 10%
in net price
received $572M in PLUS

Figure 4. Parent PLUS loan borrowing by family characteristics,
2011-12

                                         Share       Cumulative amount
                                       borrowing          of PLUS
                                          PLUS       loans to parents

             0 to 25th percentile         9.6             $11,629
Parental     26 to 50th percentile        13.7            $16,049
income       51 to 75th percentile        16.5            $19,854
             76 to 99th percentile        15.5            $26,365

             HS or less                   12.2           $14,755
Parental     Sub-Baccalaureate            14.8           $18,015
education    Bachelor's degree            14.6           $20,380
             Advanced degree               14            $24,397

Marital      Single parent                12.5            $15,805
status       Married/remarried            14.5            $20,852

                                      PLUS as a percent of Aid

             0 to 25th percentile                32
Parental     26 to 50th percentile              40.3
income       51 to 75th percentile              50.5
             76 to 99th percentile              56.2

             HS or less                         42.5
Parental     Sub-Baccalaureate                  45.9
education    Bachelor's degree                  48.2
             Advanced degree                    50.5

Marital      Single parent                      41.4
status       Married/remarried                  48.9

Notes: Figures reflect dependent students only. Sub-Baccalaureate
category represents parents who have some college,
technical/vocational training, and Associate's degree. Aid Package
includes all loans including PLUS.

Source: Analysis of NPSAS: 12

Figure 6. Parent PLUS loan borrowing by income quartile, parental
education, and marital status for various levels of institutional
selectivity

                                        Parental education

                                  HS or less      Advanced degree

Moderately selective & Very         50.4                73.5
  selecti..
Minimally selective & Open          14.2                11.1
  admissi..
Not public or private nfp           35.5                15.4
  4-year

                                        Parental income

                                Lowest quartile      Highest quartile

Moderately selective & Very         50.6                72.8
  selecti..
Minimally selective & Open          13.3                11.2
  admissi..
Not public or private nfp           36.1                16.1
  4-year

Source: NPSAS:12
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