Student Loan Limits Deal a Blow to Economic Equality

It's not the government's job to determine how much a family can spend on a child's future.

In-crowd shot during graduation

We must push back against actions that prevent families from helping secure their children's futures.

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The new rules governing parent PLUS loans are inimical to the 2020 national goal of having 60 percent of Americans receive 2- or 4-year degrees, 100,000 new STEM teachers trained over the next ten years, and efforts to achieve an America that is “built to last … a country that leads the world in educating its people … that attracts a new generation of high-tech manufacturing and high-paying jobs,” as President Obama said in his 2012 State of the Union address. For an America “built to last,” we need an increase of 8 million Americans with 2- or 4-year degrees, a diverse workforce and entrepreneurs who reflect the best in training, intellectual capital and innovative thinking. An America “built to last” must tap a broader and more diverse population that is equipped to meet future challenges and create new opportunities in scientific, technological, engineering, agricultural and other enterprises. Every American must be given an opportunity and a stake in moving the nation toward economic equity, financial freedom and justice.

As the only federal direct loans available to graduate students and to the parents of undergraduates, the PLUS loan program was an effective tool for increasing educational access and for making college affordable. There was no indication that the program was abused, had disproportionately high default rates, or was losing money. The Department of Education made adjustments in its interpretation of “adverse credit” without inviting public comment or having data that the existing regulatory interpretation ill-served the department, American taxpayers or borrowing families.

[Read Rachel Fishman: Keep Borrowers From Drowning in Debt]

The DOE’s change has made it difficult or impossible for certain parents to qualify and precipitated financial havoc and instability on those institutions educating disproportionate percentages of low-income students. The DOE’s explanation? The changes reflect its commitment “to high standards when it comes to managing taxpayer dollars and to ensuring that families aren’t taking on debt beyond what they can afford.”

The government has a responsibility to prudently manage taxpayer dollars and to ensure their use for intended purposes. But the default rates on PLUS loans were lower than other federal college loan programs. There was no evidence of fraud, abuse or a violation of public trust. The program was making money. Yet a decision was made to change the regulations ostensibly to ensure that families aren’t taking on too much debt.

[See a collection of political cartoons on the economy.]

The government should help borrowers understand the implications of their borrowing choices and ensure that private student loan providers are complying with federal consumer protection laws. Protection against default or loss of public dollars is one thing. But determining what families “can afford” is both paternalistic and government overreach. 

Unless the risk of public dollars is at stake, government should neither determine how much a family spends on their children’s future nor arbitrarily block public access to programs designed to help pay for education. Those who subscribe to Thomas Jefferson’s belief that people cannot be “ignorant and free,” that education is light and “light and liberty go together” will borrow to the hilt for their children’s education, though they should not have to.

Until free, high-quality PK-20 education is a right for all in America, we must push back against actions that dim the light on families seeking economic equity, financial freedom and a secure future for their children.