It isn’t just students who borrow money for college — their parents do, too. And parental borrowing is growing faster at the University of Akron than at any other public university in Ohio.
Last year, parents of more than 2,000 UA students took out more than $21.5 million in the Parent Loan for Undergraduate Students program, or PLUS. Similar loans called Grad PLUS are available directly to graduate students.
The use of undergraduate parent loans has exploded at UA, growing by 1,200 percent over the last decade and by 50 percent in the last year alone.
Parent loans at UA grew twice as much as the university’s nearest competitor, Youngstown State, where they increased 564 percent.
“A family with a low to moderate income whose child does not receive scholarships or grants will have to turn to loans,” Michelle Ellis, financial aid director at UA, said in an email.
“What can you buy today that costs the same as it did 10 years ago? Some parents simply are not able to put funds away for their child’s college education.”
The parent loans are federally unsubsidized, lower-interest loans that parents take out for their dependent children. The annual limit is equal to the student’s cost of attendance minus any other financial aid.
Parent loans soar
Nationwide, as the 2008 economic collapse caused banks to tighten up on other forms of credit, such as home equity loans, parent loans soared in popularity. PLUS volume jumped 17 percent a year over the most recent two-year period for which data are available, to $10.4 billion, said program director Matt Reed of the Institute for College Access and Success, which tracks student debt.
Between 2004 and 2009, the percentage of dependent graduating seniors nationwide whose parents used PLUS rose from 15 percent to 19 percent, he said.
PLUS is separate from private loans, for which data are not reliable, although some private lenders have reported they are seeing year-to-year increases as high as 29 percent.
Meanwhile, the average annual PLUS shot up at UA, with 302 parents taking out average loans of $5,400 in 2000-01 and 2,144 taking out loans of $10,000 in 2010-11.
Parents of students at Miami University led the state with average loans of $15,800 in 2010-11. At $23,700 for in-state residents, Miami is the most expensive public college in Ohio.
Higher at private schools
PLUS volumes are even higher at private universities, where published costs are often double or triple that of the tax-supported institutions. PLUS, which is not income-based, is easy for those with good credit to get.
At Baldwin-Wallace College in Berea, for instance, the volume of PLUS has grown from $2.5 million in 2000-01 to $9.1 million in 2010-11; at Hiram College in Portage County, from $855,000 to $2 million; at the University of Mount Union in Alliance, from $1.7 million to $5.1 million.
Yet the loans fly largely under the radar. They are not included in student loan debt figures that are reported in the media, as they are made to the parent and not to the student.
So while students may have loans to pay back when they get out, so do a growing number of their moms and dads.
Consider Stephanie Mc- Elroy of Columbus, who is studying for a bachelor’s degree in financial planning at UA and expects to graduate next year.
She figures she will owe about $37,000 for her five years of school. It is a debt she has been happy to take on. “My college education is an investment,” she said. “It’s OK for me.”
Debt affects family
But McElroy’s debt actually will be bigger than that. She said she also plans to pay back the $13,500 that her mother, a single parent who works as a home health aide, took out under PLUS.
The family is strapped, McElroy said. She has three younger siblings and feels obligated to take on a debt that isn’t legally hers.
Even if McElroy absorbs her mother’s loan, her younger siblings may not get the opportunities that she has as the first member of her family to go to college.
“I think the younger ones won’t go to college,” McElroy said. “They’ll go to community college or a trade school. We have no money saved up.”
McElroy’s situation illustrates the challenges that student borrowers can face.
While she hopes to make $30,000 to $40,000 in an entry-level job when she graduates, she will spend years paring down the $50,000 that she and her mother will owe.
That may interfere with her other goals, from buying a home to marrying and having a family.
Nor are her challenges, or that of her peers, likely to subside, said Reed, of the national debt-tracking association, as college costs continue to outpace inflation and family resources.
Carol Biliczky can be reached at firstname.lastname@example.org or 330-996-3729.
David Knox, former computer-assisted reporter, provided the research on debt.