Making Plus Loans Add Up for All Americans

The U.S. Department of Education is right to periodically reassess the rules and administration of the Direct PLUS Loan Program. It is obligated to ensure that PLUS is as accessible and beneficial as possible to the broadest segment of the population. At the same time, it must ensure a fair return on the investment of taxpayer dollars.

In considering possible changes to PLUS, the Department must find ways to protect and promote the original intent of the program, which was designed to help enhance access to higher education for all Americans. Without PLUS, many parents simply could not fund a college education for their children. And this is particularly true for poor and minority students whose families may have few or no resources to pay for college.

I know this to be true. The Department's recent, controversial adjustments to the PLUS policy, which tightened the credit criteria for parent loan eligibility, appears to have directly contributed to an enrollment decline at Morehouse College and a number of other historically black colleges around the country. For example, during the 2012-13 academic year, Morehouse enrolled 125 fewer students than expected. Normally about eight percent of Morehouse students who pay a deposit to attend do not enroll, but that number doubled to 16 percent, in part, we believe, because of the new loan rules.

The loss in tuition revenue to Morehouse from this group of students who did not attend in 2012 was substantial. But the greater loss is the possible negative impact on the young men themselves and, ultimately, on society. Perhaps these students attended another college last year. Perhaps they just "stopped out" long enough to save money and will enroll in college in an upcoming academic year. There is also the distinct possibility that they dropped out of higher education altogether. We may never know.

But what we do know is that, according to the National Center for Education Statistics, "students who enroll in college in the fall immediately following their high school graduation have greater college completion rates than those who delay enrollment." We also know that students who graduate from college earn 84 percent more income over their lifetimes than do students who only graduate from high school. Finally, we know that there are about 4.3 million African Americans with some college education, but no degree. We do not want to add to that number! Nor can our nation afford to lose the human capital and likely earning potential of these students who will be relatively less able to compete in our increasingly credentialed society.

The bottom line is that a college education is a good investment for students and their families -- as well as for the nation. With that in mind, I recommend that the credit criteria for Parent PLUS not simply be returned to the pre-2012 changes, when, arguably, the threshold for eligibility was unreasonably low, but include the following additional provisions:

  • Rebrand and re-market the PLUS program for parents as a Family Higher Education Loan. The idea is that students and their parents should come to think of the loan as "our investment," rather than as the "parents' debt." Because we know that students benefit financially from having a college degree, we should set the expectation that they will share the responsibility of helping to pay for the cost of their education from their future incomes -- even as colleges and universities work to ensure college is affordable by keeping higher education costs down.
  • Tie the PLUS loan interest rates and repayment to student majors, academic performance and persistence to graduation. It is fortuitous that the fastest growing jobs are also those that have the highest earning power -- that is, "STEM jobs," or those that require competence in science, technology, engineering or mathematics disciplines. Students who major in those fields and who are also doing well academically, are a likely to be a better investment than those who do not, since they are more likely to be both employable and employed. A major-based student performance provision would incentivize parents to work more closely with their children to ensure their progress toward graduation. Colleges and universities would also be incentivized to do a better job of academic advisement (a key factor in persistence to graduation) if the performance of their PLUS loan students who are majors in the STEM fields, in particular, was included in President Obama's College Scorecard.
  • Especially during an economic downturn, the rules should be relaxed in a "performance-sensitive" way so that parents do not have to forgo or postpone higher education for their capable children because of job loss or other negative financial conditions that are likely to be reversed when the economy recovers.

    With this approach, an individual's academic performance and employment potential can trump a family's adverse credit!