When many of us think about the burden of student loans, our first thought goes to the students who take out loans. However, parents are often overlooked in this conversation and they can carry a loan burden, too.
In 2020 there were approximately 3.6 million Americans with Parent PLUS loans who owed a combined $101 billion, according to the New York Times. A 2021 report by Texas Public Policy Foundation found that the median amount parents borrowed was $23,415. There’s no limit on the amount parents can borrow with Parent PLUS loans – so some owe the full cost of college attendance.
The Parent PLUS loan program was created in 1980, and designed to help parents with lower incomes pay for a child’s college education. Unfortunately, these loans can have higher interest rates than other federal loans. According to a 2020 study by the Federal Reserve Bank of Dallas and Trellis, borrowing increased from around $5,000 a year in 1993 to more than $16,000 by 2014.
Parent PLUS loans can lead to intergenerational higher education debt among families, and they disproportionately affect families of color. Woven into existing racial wealth disparities is the uneven potential for generational wealth. Generational wealth is the financial assets families pass down between generations, and can influence the amount of debt a person will carry. As more parents of color struggle with student loan debt, it can be harder to accumulate this generational wealth.
Student Freedom Initiative Helps Parents Navigate Loan Debt
In 2019, Robert F. Smith paid over $34 million to help that year’s Morehouse College graduates pay off their loan debts. With this gift, Smith also agreed to alleviate Parent PLUS loans, which meant the parents of the Class of 2019 also received financial support.
“I’m the first generation in my family to have all my rights in America,” said Smith at the Morehouse 2019 graduation ceremony. “And when I think about that, I take that responsibility seriously, to bring all of the education and dedication and effort to create in this world, in this economic structure, opportunity that I can then drive into philanthropic fabric to do what I think is the most important thing on this planet, which is to liberate the human spirit.”
Smith continued his efforts to relieve both parents and students from loan debt by launching Student Freedom Initiative. This non-profit offers income-contingent funding alternatives to Parent PLUS and other federal loan programs, as well as student support resources and internship opportunities.
Learn more about Smith’s ongoing work with Student Freedom Initiative.