Other types of financial aid, such as direct student loans and work-study programs, did rise, but not enough to replace the lost dollars from these federal parent loans, the study found.
The study looked at only four-year non-profit colleges and universities. It is possible that the black students who couldn’t get enough loans through their parents to afford a four-year school ended up going to a two-year community college. But Matthew Johnson, one of the authors, pointed out that enrollments declined at community colleges during this time period, and it’s unlikely that all of these black students found a more affordable college to attend.
Johnson also investigated whether something other than changes to the parent loan program – such as changing economic conditions or housing prices –  might have caused the decline in the number of black college students, but couldn’t find any other factor.
“The signs kind of point this way. It was the PLUS loan changes that had a significant association with declines in black enrollment,†said Teresa Duncan, director of the Mid-Atlantic Regional Education Laboratory of the Institute of Educational Sciences, which commissioned the study.
The new, stricter credit requirements were somewhat relaxed starting this March. For example, parents can now obtain loans if their delinquent debts don’t exceed $2,085. It is, of course, unclear how much parent loans will rebound this fall, but New America’s Fishman doesn’t expect them to return to pre-2012 levels.
The problem, according to Fishman, is that the federal parent loan program doesn’t factor in a family’s income or ability to pay. It gives unlimited loans – up to the cost of the child’s university tuition and fees – Â even to parents who are so poor that they qualify for the maximum federal Pell grant of $5,730. That could be a parent living under the poverty line, who couldn’t possibly pay back $50,000 in college loans. Parents can end up in retirement with their Social Security checks garnisheed and too little to live on.
“What we really need to do is figure out if we want parents, especially low-income parents, to take on this debt,†said Fishman. “Is this the best public-policy solution for financing higher education?â€
Fishman argues that low-income students would be better served with more financial aid from colleges, more grants from the federal government, and more student loans – but ones whose repayment plans are based on a student’s future earnings.
* A school would be in the low-income category if 64% or more of the students qualify for a federal Pell grant. That mirrors the poverty rates at historically black colleges. Typically, family income of Pell recipients is below $50,000, but it can be higher depending upon family size.