Preston Cooper writes for the Martin Center about an “unhealthy mix” involving college student loans.
Parent PLUS is not typically the loan program making headlines when student loans are in the news. But over the past several years, it has become a central part of America’s higher-education financing system. Under Parent PLUS, parents can borrow freely—with no limit—from the federal government to support their children’s education.
Government programs without significant guardrails rarely turn out well, and Parent PLUS is no exception.
New research from Adam Looney and Vivien Lee of the Brookings Institution illustrates just how out-of-control the parental loan program has grown. In 2014, the average parent borrower held $38,812 in Parent PLUS debt at the conclusion of her child’s education—an increase of more than $17,000 from just three years prior. Since 1994, average Parent PLUS balances have more than quadrupled, after adjusting for inflation.
The consequences of this parent debt explosion are many, and few of them are good. Because the federal government effectively imposes no caps on Parent PLUS lending, the program gives colleges broad latitude to raise tuition. A 2018 paper by UCLA economists Mahyar Kargar and William Mann confirmed the inflationary impact of unlimited parental loans. But higher tuition is just one of many problems that stem from this program.
