PLUS Borrowing in Texas: Repayment Expectations, Experience, and Hindsight by Minority-Serving Institution Status

44 Pages Posted: 25 Feb 2020

See all articles by Carla Fletcher

Carla Fletcher

Trellis Company

Jeff Webster

Trellis Company

Wenhua Di

Federal Reserve Bank of Dallas

Date Written: January 2020

Abstract

After decades of college costs outpacing inflation, institutions of higher education have become less able to meet the full financial need of students (Clark, 2015) (Walizer, 2018). For families trying to fill this gap, the Federal Direct PLUS for parents (PLUS) has been an increasingly popular, but problematic, financing option. The program enables parents to incur substantially larger amounts of education debt than their college student children even though the parents, unlike their children, receive no direct economic returns on the investment. Eligibility for PLUS entails only a modest check for adverse credit, not a more thorough – and common – check of credit worthiness that reflects ability to repay the debt. Consequently, some parents with low credit scores may borrow more than they could reasonably be expected to repay, but lack some of the programmatic repayment options and protections available to student borrowers. And, because loan counseling is not mandatory for PLUS borrowers, some parents may be less informed than student borrowers. For these reasons, Trellis conducted a study of parent borrower repayment patterns and a qualitative analysis of parent perceptions of the loan process and its effect on other financial experiences. In particular, Trellis examined the experiences of parents whose children borrowed while at either an Historically Black College or University (HBCU) or a Hispanic Serving Institution (HSI) since these schools serve a higher proportion of students from low-income families who might have lower credit scores. Additionally, these minority serving institutions (MSIs) historically have been underfunded and, consequentially, often lack the financial strength to meet the full financial need of its students whose parents, in turn, become more reliant on PLUS loans to gain access to higher education for their children. This study found similarities and differences in borrowing experiences between MSI parents and Non-MSI parents.

Keywords: Federal Direct PLUS Loan, Parent PLUS Loan, Texas, Student Loans, Minority Serving Institution, HBCU, Hispanic Serving Institution, Borrower Repayment Patterns, Mixed Methods Research

Suggested Citation

Fletcher, Carla and Webster, Jeff and Di, Wenhua, PLUS Borrowing in Texas: Repayment Expectations, Experience, and Hindsight by Minority-Serving Institution Status (January 2020). Available at SSRN: https://ssrn.com/abstract=3527116 or http://dx.doi.org/10.2139/ssrn.3527116

Carla Fletcher (Contact Author)

Trellis Company ( email )

301 Sundance Parkway
Round Rock, TX 78681
United States

Jeff Webster

Trellis Company ( email )

301 Sundance Parkway
Round Rock, TX 78681
United States

HOME PAGE: http://https://www.trelliscompany.org/research/

Wenhua Di

Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
Dallas, TX 75201
United States

HOME PAGE: http://www.dallasfed.org/research/economists/di.cfm

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