Study Shows PLUS Loans Actually Widening Income Gap for African-American Families

A recent New America analysis of Education Department data demonstrates how high-risk parent PLUS loans are for families of color, especially African-American families. This analysis also shows that when parent and student loans are considered together, federal student loan policies are driving an intergenerational accumulation of debt that burden the most disadvantaged families. These families have seen their wealth erased through decades of discriminatory practices and policies, including a housing crisis brought about in part by predatory lending practices, and have the highest default rates. Of the millions of Americans struggling with student loan debt, these families have the most difficult plight. Ameritech Financial, a document preparation company that assists federal student loan borrowers with applications for income-driven repayment plans offered by the Department of Education, aims to assist all borrowers struggling beneath the heavy weight of student loan debt.

“The data shows that the wealth gap continues to expand under the pressure of student loan debt with the debt taken on by families of color, in pursuit of raising their socio-economic future, actually further entrapping them in poverty,” said Knickerbocker. “We aim to help borrowers who want relief from these limitations by assisting them in applying for and maintaining enrollment in federal programs such as income-driven repayment plans, possibly resulting in lower payments and even forgiveness after 20 or 25 years.”
The report shows that African-American parents, deeply impacted by the subprime mortgage crisis and higher unemployment rates compared to other groups, have the worst student loan repayment outcomes of any racial or ethnic demographic. It also reveals that these families are burdened with large intergenerational education debts compared to other groups and that policies such as PLUS have widened this gap. And though low-income families are hit the worst by student loan debt, the pressure it applies upon families is enormously impactful.
“These sobering findings magnify the difficulty in dealing with student loan debt. While PLUS loans were expanded to increase access to low-income students, they had the negative consequence of burdening two generations within the same family,” said Knickerbocker.”

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