Financing Adulthood: The Risks and Hopes of Parent Borrowing through the Parent Loans for Undergraduate Students (PLUS) Program

Funding children’s college expenses can be a family project, often requiring substantial savings from parents and educational debt from children, but parents also borrow to support their children’s postsecondary ambitions. Despite growing use of debt to finance children’s college expenses, studies have overlooked parent borrowing’s role in intergenerational financial support. This study investigates parent borrowing through the federally-funded Parent Loans for Undergraduate Student (PLUS) program to illustrate the risks and hope current higher education policies demand of families across the income distribution who are working to provide a middle-class life for their children. To do so, this research uses three datasets from the National Center for Education Statistics, including the National Postsecondary Student Aid Study (NPSAS), a nationally-representative, cross-sectional survey of American undergraduates in 2015–16, the Beginning Postsecondary Student Longitudinal Study (BPS), a nationally-representative, longitudinal study of American undergraduates followed between 2003 and 2009; and finally, the Educational Longitudinal Study of 2002 (ELS:2002), a nationally-representative, longitudinal study of 10th-graders surveyed between 2002 and 2012. First, this study investigates the risks parents take when they borrow through PLUS by identifying parents’ debt burdens across the income distribution. Second, I consider whether parent borrowing delivers on parents’ hopes by examining whether PLUS eases children’s path into adulthood by increasing Bachelor’s degree attainment and financial wellbeing for families across the income distribution. My project finds that parents’, regardless of their means, are burdened by PLUS loans, albeit in different ways. In addition, PLUS loan debt is highest among high- and upper-middle income parents, demonstrating that college costs are beyond the means of even advantaged families. In addition, rather than supporting young adult children as they transition to adulthood, PLUS is not guaranteed to deliver on parents’ hopes. Instead, PLUS provides limited benefits in terms of degree attainment, and higher levels of PLUS loans are associated with greater financial stress for young adult children. I discuss the theoretical and policy implications for intergenerational family support, debt, and college affordability