Campuses work against the interests of poor and working-class students in so many ways. The financial aid system itself often works against the interests of the very students who need financial aid. As colleges stare down cuts in state funding, donor pressures to boost sketchy college rankings, declining enrollment, and federal budget chaos, poor and working-class students can again be collateral damage as financial aid is leveraged at too many campuses to compete for privileged students.
New America has just released a report by Stephen Burd on how 32 selective private and 18 public research universities award much of their institutional financial aid dollars to students without financial need while steering lower-income families to take on predatory Parent Plus loans that they cannot afford.
Collectively, these 41 universities, many of whom work closely with private, for-profit enrollment management consultants, spent $2.4 billion of their own financial aid dollars on students who lacked financial need in 2023, according to the latest data available. Nearly $2 out of every $5 these schools spent on institutional aid that year went to non-needy students—those whom the federal government deems able to afford college without financial aid. Meanwhile, more than 32,000 families of Pell Grant recipients who had either graduated or left these schools in the recent past were stuck with PLUS loans they took out to pay for their children to attend these institutions. These families carried a median Parent PLUS loan debt load of nearly $30,000 each. For many of these families, the amount they owed came close to or exceeded their yearly earnings.
As Pell Grants now cover only a fraction of the costs of going to college, we've all heard about students graduating with high levels of debt. But these Parent PLUS loans carry even deeper risk for students' families:
Unlike federal student loans, which are strictly limited to $5,500 to $7,500 per year for dependent students (those under the age of 24), PLUS loans, for much of their history, have allowed parents to borrow up to the full cost of attendance, which includes not only tuition and fees but living expenses as well, regardless of their income.
Burd writes of of the perfect storm of financial pressures giving rise to "predatory inclusion" at some of these campuses: recruiters may actively encourage low-income students to apply, then boast of the rising numbers of Pell Grant eligible students enrolled. Campuses benefit from the revenue from these Parent Plus loans regardless of whether parents can ever repay them. Privileged students, meanwhile, graduate debt free while boosting college rankings with their high GPAs and SAT scores; if all goes well, they and their parents are likely to become donors. The parents of low-income students, meanwhile, risk eventual wage garnishment or worse.
Low-income families of color who have been unable to build generational wealth because of housing discrimination may be most likely to turn to Parent Plus loans and to struggle the most to repay them. Any encouragement that we might see in college enrollment growth among poor and working-class students is tempered by the life-changing costs for many families:
As states dramatically reduced funding for their public universities and the institutions raised their prices, PLUS loan borrowing exploded. According to the Century Foundation, annual PLUS loan disbursements at public universities grew nearly 300 percent between 2000 and 2017, from $2 billion to almost $8 billion.99 In 2008, the families of University of Alabama students took out only $25 million in Parent PLUS loans. A decade later, they borrowed almost five times that amount
None of these schemes to generate campus revenue, boost college rankings, lure out-of-state students, or steer families into crushing debt address the core crises of college affordability. Nor does recent congressional action to cap Parent Plus loans do anything about the need for high levels of college debt for so many families.
By definition, Pell Grant eligible students come from families who cannot afford the costs of college. It borders on the immoral that any campus then steers those very families into crippling debt to cover those costs while awarding privileged students grants and scholarships.
It borders on the immoral that so many of these structural inequalities remain hidden from those who benefit and from those who struggle to merely stay afloat so that each assumes that they're merely getting what they deserve.
