When a college student applies for federal financial aid, the government calculates that student’s Expected Family Contribution (EFC), a measure of how much the government thinks the student and his or her family can afford to pay for college. But when it calculates what that student’s parents can borrow through the federal Parent PLUS program, the government ignores its own calculation. Parents can easily go into debt beyond their ability to pay.
“Parent PLUS loans should be capped at the independent student limit or should be capped according to a parent’s Expected Family Contribution (EFC), the number used to determine a student’s eligibility for federal student aid. EFC is calculated when a family fills out the FAFSA to apply for financial aid. So if a family fills out the FAFSA and has an EFC of zero—indicating that the student is truly needy and eligible for a maximum Pell Grant—the parents would not be able to borrow extra money. If the federal government has determined that a family has zero ability to pay, why would they then give parents debt they know will be a struggle to pay back? Capping PLUS loans not only prevents parents from over-borrowing, it also removes any incentive for institutions to increase their revenue by raising their [cost of attendance] and funding the increase through Parent PLUS.” (emphasis added)
This sensible and easy-to-implement idea would protect many families from deep financial trouble.