For Black parents looking to help their children pay for an education at a historically Black college or university, Parent PLUS loans have become a common choice.

Congress created the loans as a way for middle- and upper-income parents to help their children pay for college. But over time, they’ve become the answer for many low-income families, too, since the program doesn’t consider a borrower’s ability to repay.

That’s been particularly true among Black families. Forty-four percent of Parent PLUS borrowers who are Black earn $30,000 or less, according to the National Association of Student Financial Aid Administrators. That compares with just 10% of white Parent PLUS borrowers with incomes under that threshold.

Many Black parents borrow to help their children attend HBCUs, whose histories and missions carry a strong allure despite the fact that many of the institutions are cash poor, and can’t provide the same financial aid as those that serve predominantly white students.

Take, for example, Florida A&M University alumnus Bryton Legree, who graduated in 2018. He had known FAMU was the place for him ever since he was a little kid. When it was time for college, FAMU was the only place he applied.

“I wanted to stay in Florida, and just wanted to go to a school that my family has always encouraged me to go to,” he said.

Pell Grants, federal aid for low-income students, helped him cover tuition. His parents also took out about $7,500 in Parent PLUS loans to cover the rest of his costs, like his off-campus housing.

Legree’s parents are still paying back their Parent PLUS loans.

Paying for college can be complicated — and experts agree families should understand the implications of Parent PLUS loans before signing. Here are three things to know.

Loans can be hard to pay back

To understand the widespread concerns about Parent PLUS loans, it’s key to recognize that they become difficult to repay for many of the people relying on them.

For one thing, Parent PLUS loan borrowers — the parents — don’t see their incomes increase after taking out the loan because they aren’t the ones who gain new earning potential from the degree. Only their children do.

And racial disparities exist in the incomes of parent borrowers, which can perpetuate wealth gaps over generations.

Open Campus teamed up with journalism students from Northwestern University a few years ago to write about how parent borrowing plays out differently at HBCUs and at predominantly white colleges. And they found that parents at three of Atlanta’s HBCUs — Clark Atlanta University, Morehouse College, and Spelman College — combined took out more than $102 million in Parent PLUS Loans in 2018.

Meanwhile, parents at majority-white Emory University — which has nearly the same number of students as those HBCUs combined — borrowed only $7 million in Parent PLUS loans that year.

The popularity of the loans among Black Americans can be attributed to the racial wealth gap, said Peter Granville, a fellow at the Century Foundation, a progressive think tank. He studies federal and state policy to improve college affordability.

White families, for example, are more likely to own a home than Black families. Not only are homes a source of wealth, but homeowners can borrow a certain percentage of their home equity to pay for college.

“A family that doesn't have that option might turn to Parent PLUS loans,” Granville said.

Parent PLUS loans also aren’t capped, unlike other federal student loans. A family can borrow the full amount of attendance.

Compared with other federal student loans, however, Parent PLUS loans have some of the highest interest rates — usually between 7% and 8%, Granville said.

The higher the interest rate, the more expensive the loan — a major burden for low-income families.

“That interest compounds over time. A family can struggle just to tread water with that interest, let alone lowering their balance,” Granville said.

Payments are due immediately

It’s important that families understand the process of making payments on Parent PLUS loans. Unlike some other federal loans, the repayment period for Parent PLUS loans begins as soon as they take it out, but parents can apply for a deferment period of up to six months.

Not understanding the fine print of the loan program is something Wadee Walton regrets. She took out $20,000 in Parent PLUS loans (on top of $50,000 of her own student loans) for her son to attend North Carolina Agricultural and Technical State University.

Wadee Walton says she struggled for years to pay off Parent PLUS loans that she took out for her son. (Courtesy of Wadee Walton)

Walton attended Indiana University of Pennsylvania, a predominantly white institution. Looking back, she sees the gap in self-confidence and awareness that going to an HBCU could have given her. Attending an HBCU “is an integral building block for a healthy and successful journey through life,” she said.

She took the last loan out for her son in 2011, but didn’t start making the minimum monthly payment of $462 until 2015. A few years later, she increased her payments to $1,000 a month.

Over time, Walton has struggled to pay down the principal of her loan. When she was raising two small children, she couldn’t afford to pay the bills and also make loan payments. She spent four years in forbearance — a period when payments are postponed but interest typically still accrues. Even when she started making monthly payments above the minimum amount, the balance barely budged.

The system, Walton said, “shouldn't be set up that it takes you that long.”

Unfortunately, that is common. Many Parent PLUS borrowers still owe over half of their principal loan after 10 years of being in repayment, per a study from Granville about parent borrowing.

Walton consolidated her Parent PLUS loans and had all her debt forgiven this past January through the Public Service Loan Forgiveness program. (PSLF is a program for people who work in government or nonprofit jobs.)

Experts say they should be a last resort

Given all the ways Parent PLUS loans work differently than other federal student loans, they are one of the riskiest options, Granville concluded in his report. Debt from these loans, he said, affects more than 3.7 million families whose parents owe upward of $104 billion.

And, many parents spend more years paying off Parent PLUS loans than they spent living with and raising the child whose education the loan helped fund, Granville found.

The United Negro College Fund says Parent PLUS loans should be a last resort for Black families — even if they are sometimes necessary.

The loans “have the ability to be debilitating to Black families if Black families choose to use it as a major financial source,” said Lodriguez Murray, a first-generation high school and college graduate and senior vice president at the United Negro College Fund.

Instead, families should first do more research into scholarships and grants offered by nonprofit organizations, said James Ford, executive director at the Center for Racial Equity in Education. One example is Morehouse College alumnus Robert F. Smith’s Student Freedom Initiative, which offers loans to students who make payments that vary in size, according to income, after graduation.

Those in the program don’t have to pay the loan back in full, and their payments stop after 20 years regardless of where their debt stands. Ford said the effort “exists to provide a non-predatory alternative to Parent PLUS.”

Williams and Patterson are inaugural fellows in the HBCU Student Journalism Network, a project of Open Campus. Support the program here.