Reshaping Parent PLUS Loans: Recommendations for Reforming the Parent PLUS Program

The use of Parent PLUS loans—federal loans for parents of dependent undergraduates—is increasing, even as student borrowing is declining. Parent PLUS loans were originally designed to provide liquidity to high-asset families who could not cover their expected family contributions (EFCs) with current income. But policymakers have pushed the Parent PLUS program past this original mission. Now, just 38 percent of Parent PLUS loans are equal to or less than the family’s EFC, and loans are too frequently issued to borrowers who cannot repay. In this article, the authors argue that stopgap solutions, such as expanding income-driven repayment (IDR) for Parent PLUS borrowers, will only worsen the problem, providing large subsidies to affluent families. They propose returning to the program’s original intent, lending limited amounts to parents who can repay and providing additional financial aid directly to low-income students, rather than to their parents.