Do enrollment management strategies lead to high debt for poor families?

“Congress created the Parent PLUS loan program in 1980 to “ provide high-wealth families with a low-interest loan option for parents supporting their children’s college costs ,” according to Georgetown University’s Center on Poverty and Inequality . But as the center and other researchers have pointed out in recent years, the loans have increasingly been taken out by low-income families to make up college funding gaps. Meanwhile, students of wealthier families can sometimes benefit from deep tuition discounts from colleges trying to attract them. The left-leaning think tank New America recently delved into those two issues in tandem, looking at colleges that offered generous financial aid to students of higher-income families while lower-income families took out substantial debt via the Parent PLUS program to cover educational costs. The report, released in February, listed 41 institutions that collectively provided an average of nearly $15,000 per first-year students without financial nee d in 2023. At the same time, students from families with annual incomes of $30,000 or less were charged an average of $18,000 after aid at those institutions, leaving those families to fill the gaps — often with Parent PLUS loans . The report’s author — Stephen Burd, a senior writer and editor with New America’s higher ed program — attributes these inequities to financial aid leveraging. This is higher ed jargon for colleges, often with the help of consultants, calibrating their student aid awards to best hit enrollment and revenue goals. A big spending and tax bill passed by Republicans last year will take effect this summer and set a lifetime limit on Parent PLUS loans of $65,000 per student — a policy intended to reduce debt burdens. But Burd argues that lower-income families can ill afford to take on even those lowered debt amounts. Higher Ed Dive spoke with Burd about his findings and how he thinks colleges and policymakers should address disparities in financial aid. Editor’s note: The following interview has been edited for brevity and clarity. HIGHER ED DIVE: Tell us about the genesis of the research. What made you study these two financial aid issues together — Parent PLUS loans and tuition discounting for higher-income students? STEPHEN BURD: It's almost been a decade that I've been looking at a concept called enrollment management and looking at the way that financial aid and college admissions have transformed over the last few decades. It actually goes back to the 1980s. You can look at that transformation, which was really about making higher education more businesslike, and how that has made higher education less accessible and affordable for low-income families. Stephen Burd, senior writer and editor with New America’s higher ed program Permission granted by Stephen Burd Many public universities looked to the private college model and looked at enrollment management as a solution. The question that I always had was, faced with an average net price that was up to nearly all of a family's yearly income, how do they possibly still go to that college? And the obvious answer over time was that they're taking on Parent PLUS loans. This idea that colleges were steering low-income families into PLUS became stronger in my mind. Then the Wall Street Journal ran this big front page story in 2021 about Baylor University steering low-income families into PLUS loans . Seeing it outright was big. With this latest report, what exactly did you look at, and what did you find? BURD: I looked at different data sets. There's the College Scorecard, which has data about the share of PLUS loan borrowers who are the parents of Pell recipients, and then the amount that they borrow. And then the other data I looked at was over 20 years of institutional financial aid data for over 300 schools. Basically, I was trying to identify schools that, through the data, you could tell were leveraging a large amount of their aid and leaving large financial aid gaps. And so I narrowed down the list to 41 universities, both public and private. It doesn't mean that these are the only universities doing it. These 41 universities spent $2.4 billion of their own financial aid dollars on students without need in 2023. Meanwhile, more than 32,000 families of Pell recipients who either graduated or left these schools in the recent past were stuck with PLUS loans that they likely won't be able to repay. Did any of the schools on the list or any particular data point especially surprise you? St. John’s University is basically a commuter school in Queens. It's been most famous for basketball. But over the years, they've been trying to get rid of that commuter school reputation, and they've built more and more of a residential campus. And I was surprised by how much non-need-based aid they give. They give the most of any university — not just in my 41 but of all the 300 universities that I looked at. It was something like $218 million a year. A couple of the schools claim that they meet 100% of financial need, but they still have a large average net price. So I'm not sure how they are counting meeting need. Too often, we still think of financial aid in the ways that it operated 20, 25 years ago, and assume that needy students are getting the bulk of the aid. And that definitely is not true, unfortunately. The only schools where that's really still true are the most elite private colleges that also are the richest private colleges. Both of these things are happening at the same colleges — deep discounting for wealthier students and Parent PLUS loans for needier students. Do you think that’s happening consciously, or are administrations and enrollment managers responding to different incentives without necessarily connecting the dots? It's all part of these financial aid leveraging and optimization products that the enrollment management firms sell. It's just baked into it. As long as you are leveraging the majority of your aid, you're going to have financial aid gaps. And everyone's aware there are gaps. There's a little bit of magical thinking that goes on where they're like, “Well, these students will get jobs after they leave my college, and they can help their families pay off these loans.” But the colleges don't have to confront this, because there's no penalty for loading up families with debt they can't repay. Especially on the PLUS loan side, there's no default rate or repayment rate that schools are measured by. They can just kind of ignore that. I do think there are cases where schools are like, “We need more PLUS loan money.” You brought up in your report that the One Big Beautiful Bill Act got rid of the Income-Contingent Repayment Program for the Parent PLUS borrowers, so it could make it harder for families to repay loans. But it did put a cap on the loans. Is your takeaway that the law will not fix all of the issues with Parent PLUS loans? It definitely will not. In some cases, it will be much harder to repay. The amount of debt will shrink a little bit, but I don't think anyone who makes under $30,000 a year should be taking out a PLUS loan. It's incumbent on the colleges to find ways to make it more affordable for them. What else do you think is needed policy-wise? We definitely need changes in the PLUS loan program. There should be an ability-to-repay calculation in the decision as to whether a family gets the loan. And colleges should be held to account for large default rates. We also may need to make a much bigger investment in minority-serving institutions. They also depend a lot on PLUS loans. They put too many families into risky debt. But they're not doing it to chase rankings. They're doing it mainly because they just have fewer resources. One other thing is financial aid award letters. There definitely should be a standardized financial aid award letter that does not allow for packaging PLUS loans with other aid. They should just be an option. Since you've published the report, have you heard from any of the colleges on that 41 list? For some reason, the Illinois and Wisconsin NPRs [National Public Radio media outlets] got really interested in the story. They represented Marquette and DePaul and Loyola [universities], and I think each of those schools has denied steering students into PLUS loans. But I feel like their answers were basically, “We don't package PLUS loans in the financial aid award letters.” But I think it's about the extent to which you're leveraging your financial aid. And once you reach a certain point, you're leaving low-income families with gaps that force them to take out PLUS loans.

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