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| In 2012-13, NYU received over $127M in funds disbursed through Parent PLUS. |
Hint: everyone who
completes the FAFSA is invited to
apply for a PLUS loan.
What makes Parent PLUS loans different from other federal student
loans is that interest rates are higher—6.41 percent versus 3.86 percent—and payments
begin immediately after funds are disbursed.
Note that PLUS loans are a debt incurred strictly by parents and
cannot be transferred to the child.
And like other federal loans, they are nearly impossible to
discharge in bankruptcy.
Despite the less-than-ideal terms, PLUS loans have become popular
tools for financing the cost of increasingly expensive postsecondary education. At the program’s peak in 2011 (before stiffer
parent credit checks went into effect), there were almost one million borrowers
and $11 billion in disbursements. And in
the 2011-12 academic year, about 13.8 percent of undergraduate students had
parents who borrowed PLUS loans on their behalf.
But it’s a controversial program insofar questions persist
as to ease of use and the level of debt incurred by uninformed or naïve families
anxious to support the college dreams of their children.
For this reason, various oversight agencies have begun taking
a closer look at who is using Parent PLUS loans and to what end. Equally concerning is how various colleges
and universities benefit from the availability of these loans.
From data collected by the Chronicle
of Higher Education, here are the colleges where parents had the highest
average loan size in 2010-11:
- French Culinary Institute*: $37,522
- Berklee College of Music: $33,092
- Art Center College of Design: $33,070
- Boston Conservatory: $30,138
- West Coast University*: $29,484
- Brooks Institute*: $29,341
- Rhode Island School of Design: $29,255
- Full Sail University*: $28,634
- Embry-Riddle Aeronautical University: $28,137
- New York Conservatory for Dramatic Arts*: $27,432
- New York University: $27,305
- Neumont University*: $27,278
- Dartmouth College: $26,978
- California Institute of the Arts: $26742
- American Musical and Dramatic Academy: $26,667
The American
Enterprise Institute (AIE) has also been tracking where PLUS loans are
popular tools for financing education.
According to the AIE, the top 15 colleges receiving Parent PLUS by
disbursement amount in 2012-13 were
- New York University: $127.32M
- Arizona State University: $80.14M
- Michigan State University: $75.01M
- University of Illinois at Urbana-Champaign: $73.09M
- Saint John’s University: $66.17M
- University of Texas at Austin: $63.15M
- Savannah College of Art and Design: $62.38M
- Full Sail University*: $57.59M
- Purdue University: $56.14M
- West Virginia University: $55.92M
- DePaul University: $55.44M
- University of Oregon: $51.65M
- Ohio State University: $48.74M
- University of Cincinnati: $48.74M
- Columbia College: $47.77M
Before
agreeing to a Parent PLUS loan, do your research. One good resource College Reality Check, which is
an interactive website designed to guide prospective college students and their
families using comparisons of key statistics such as net price, debt at
graduation, and monthly loan payments.
And be sure
to cover your bases by looking at institutional outcomes such as graduation
rates, job placement statistics, and average earnings of recent grads. CollegeMeasures.org
provides earnings of recent graduates from Tennessee, Virginia, Colorado, Texas
and Florida colleges and universities.
At the end
of the day, Parent PLUS can be an expensive form of financing that potentially puts
parental assets and retirement at risk.
So educate yourself before blindly signing off on more debt than your
graduate can ever hope to cover in a reasonable amount of time.
*For
profit institution
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