Providing yet another example of why higher education should be free across the U.S., a new Politico investigation reveals how the federal government's Parents PLUS lending program has much higher interest rates and fees, and far fewer opportunities for loan forgiveness or reductions, than even the regular student loans driving the nation's debt crisis.
"Parent PLUS was created in 1980 to provide small loans to help reasonably well-off families finance the American Dream of an undergraduate education," explains Politico journalist Michael Grunwald.
"But in an era of skyrocketing education costs, it has grown to look a lot like publicly funded predatory lending, providing almost any borrowers with almost unlimited cash to attend any school with almost no regard to their ability to repay," he writes. "Thirteen percent of undergraduates now rely on Parent PLUS, and many of their parents are falling into debt traps."
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Grunwald goes on to detail how the Parent PLUS loan program is—as observers put it—"deeply troubled and inherently flawed."
"The loans are almost impossible to discharge in bankruptcy, just like student loans, but they’re ineligible for most of the income-based payment relief available for student loans," Grunwald writes. "Consumer advocates compare them to subprime mortgages before the bust, encouraging families to bite off more debt than they can chew — except that Parent PLUS also has a government imprimatur."
And the problems go deeper than that, he says.
Parent PLUS loans feed into the "the college-industrial complex," Grunwald argues, "helping educators jack up their tuitions while pressuring parents to make up the difference with debt, while doing nothing to ensure they’re getting a real return on their investment. It enhances accessibility, but not really affordability, simply giving parents a way to punt the skyrocketing costs into the future."
Of course, this program is just one piece of a higher education financing system that is at best dysfunctional and at worst criminal—leading some to call for free higher education as a human right. As Astra Taylor and Ann Larson pointed out in an op-ed published Tuesday in the LA Times, "The government makes an obscene profit from the student loan program—an estimated $110 billion over the next decade."
Politico's investigation offers further representation of what Demos senior policy analyst Mark Huelsman described in a Policyshop blog post last week as "the potential harm of a debt-based system of college financing."
It's not that loans can't be helpful, he continued, but just like with payday loans for cash-strapped workers, the federally-subsidized loan programs "aren’t a cause, they’re a symptom—of our inability to raise wages, provide affordable healthcare or housing, or generally broaden the social safety net in a way that prevents people from needing to borrow just to get by."