A new report from Rachel Fishman of the New America Foundation, a non-partisan Washington, D.C., think tank, highlights yet another federal government program that’s similarly widening the wealth gap: the Parent PLUS loan program. The Parent PLUS program was created in 1980, its primary goal to help middle-income families pay for college during an era of high interest rates and increasing tuition. The loans, which are not subject to the borrowing limits on other types of college loans, carry a higher interest rate than student loans and are typically used by parents only after other kinds of financial aid and loans (i.e., student loans, federal subsidized and unsubsidized loans, etc.) are tapped out.
Indeed, the majority of Parent PLUS borrowers fit this profile. As the chart below, from the report, shows, over 50 percent of borrowers in 2012 had a family income over $75,000:
Among white borrowers, the Parent PLUS program appears to work as intended (i.e. as a financing mechanism for wealthier families). Among white families, the share of PLUS borrowers increases alongside income: Only one in 10 white PLUS borrowers in 2012 had a family income less than $30,000, and a third had an income over $110,000. Among black families, however, the opposite is true: a third of black PLUS borrowers in 2012 had an income under $30,000, while one-in-10 had an income over $110,000.