- Under Secretary James Kvaal said he’s looking into spiraling student debt for parent PLUS loans.
- Those loans have the highest interest rates, and are easy to acquire but difficult to pay off.
- Currently, it’s unclear if parents will be included in Biden’s loan forgiveness plans.
A type of federal student-loan with the highest interest rate is very easy to acquire, but for many, quite difficult to pay off. A top education official for President Joe Biden says the issue is on his radar.
“That’s definitely something we’re watching,” Under Secretary of Education James Kvaal said during a virtual discussion on student debt on Monday, referring to growing debt loads from PLUS loans parents and graduates take out.
“Not all of those programs have a strong payoff economically that would allow you to repay those loans,” Kvaal added. “So it’s something we’re watching very carefully. We’re studying it. One thing that we’re looking at is whether there should be additional disclosures” like giving graduate students data on potential earnings, and all PLUS borrowers more information on loan repayment, Kvaal said.
Interest rates on PLUS loans for parents and graduate students currently stand at 6.28%, and they’re set to increase to 7.54% in July. Insider has previously reported on the spiraling debt parent PLUS loans can cause, which are a type of federal loan for parents that covers the full cost of attendance minus any financial aid the child already received. According to Urban Institute, the volume of parents borrowing PLUS loans doubled from 2009 to 2019, and currently, 3.7 million families in the US are holding $104 billion in PLUS loans.
While parents turn to PLUS loans to ensure they can give their kids educational opportunities, the problem often arises at the outset. Reid Clark — a 57-year-old single dad with $550,000 in PLUS loans for his five kids — previously told Insider he’s “just not going to take the chance on not sending my kids to school, even though it’s going to create a tremendous financial burden,” but he wished it had been harder for him to acquire so much debt.
Jeff O’Kelley, another 57-year-old dad with $104,000 in PLUS loans for his son, told Insider the same thing — the process to take on debt was “extraordinarily simple.”
“I go online, put in a little information and hit submit, and 60 seconds later, there’s another $30,000,” O’Kelley said. “I got very little information and very little confirmation and I think that’s the part that gets me the most. It was too easy, and it shouldn’t have been.”
Many of these parents don’t regret taking on the debt because they needed to do what was best for their children, but they do hope they can be included in some of Biden’s relief plans. But as of now, it’s uncertain they are under his consideration. Biden is weighing $10,000 in student loan forgiveness for federal borrowers making under $150,000, and Wall Street Journal recently reported a final decision will likely be made in July or August, closer to when student-loan payments are set to resume on September 1.
The Century Foundation’s Peter Granville recently wrote a report on the restrictive nature of PLUS loans, and he found the average PLUS borrower will spend more time paying off their loans than years spent raising their kids, emphasizing how including parents in relief would make a huge difference for them.
“While Parent PLUS loans can open doors for children, they close many doors for the parents who hold them,” Granville said, adding that “the administration’s plans to cancel $10,000 per borrower would go a long way towards reducing the most severe outcomes that befall parents with Parent PLUS debt.”