(Special to The Root) — The start of the 2012-2013 academic year brought a nasty surprise for thousands of parents of low-income college students. They had kept their sons and daughters in school thanks to a popular federal loan program called "Parent PLUS." But when they applied for the loans, normally a routine transaction, they discovered that without notification, the U.S. Department of Education had changed the Parent PLUS Loans credit-history eligibility requirements by applying private-sector underwriting standards instead of looking at the family's actual repayment ability. Suddenly these parents fell below the line and their children's college education was at risk.
For United Negro College Fund, a shortage of student aid is a familiar challenge. We are the nation's largest private provider of financial aid to minority students. Every year we support the education of more than 60,000 students through financial support for our 38-member HBCUs and by awarding more than 13,000 scholarships worth more than $100 million.
Students were the most immediate victims of the Parent PLUS Loans change. Within our network of colleges and universities, we found that more than 14,500 students, or 25 percent, were denied — not given smaller loans, not charged higher interest, but shut out of the program completely. Many of these "denied parents" had borrowed through Parent PLUS Loans just the year before. Others were parents of freshmen, and they were counting on the loan program to help them cover their tuitions this year.
The threat is not only to the education of HBCU students but also to the education of all low-income students and students of color. In a country whose population will be "majority-minority" by midcentury, these are our next generation of professionals and leaders. They are the new, more diverse face of American college students.
Worst of all, though, is that the Parent PLUS Loans disaster is not simply a bad piece in a system that usually works well. It is part and parcel of a financial-aid system that does not consistently help low-income students go to and through college — a stated Obama administration objective — and therefore contributes to locking them and their families in a downward spiral of student debt and poverty.
Obstacles for Low-Income Families
The problem isn't student loans per se. For the foreseeable future, low-income students will need loans — in addition to family contributions, Pell Grants and scholarships — to cover the cost of college. The problem is that the component parts of our jerry-rigged financial-aid system are not designed to work together to move students to and through college. For example, when programs like Parent PLUS impose criteria that exclude low-income families, it deprives these families of access to an essential part of college financing.
Low-income families are poor in large part because breadwinners lack the education they need to qualify for jobs that would lift them out of poverty. To get that education, and lacking the income, credit rating and assets to pay the high and increasing cost of college, they borrow. Some borrow from federally subsidized, lower-interest student-loan programs. But they also must call on higher-interest programs like Parent PLUS Loans. The accumulation of loans can bury them under a mountain of debt that few entry-level, college-graduate jobs pay enough to repay and thus perpetuate the student-debt spiral.
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And these low-income families are far more likely to be black or Latino than white. About half (55 percent of African Americans and 49 percent of Hispanic students in 2008) come from families that earned less than $30,000 per year. For whites, the number is 29 percent. These parents of color are also much more likely to turn to debt to pay for college.
The parents of HBCU students, for example, are more than twice as likely as non-HBCU students' parents to take out a Parent PLUS loan. Perversely, however, African Americans and Hispanics experienced the highest denial rates on PLUS loans — 65 percent and 47 percent respectively — even before last year's tightening of eligibility standards. For whites the denial rate was 28 percent.
Could the system be more perverse? Faced with the economy's need for more college-educated workers, and the demographic reality that many 21st-century workers will need to come from communities of color, we force students and parents into the student-debt spiral and then deny them the loans they need.
Four years ago, soon after his first inauguration, President Obama pledged before a joint session of Congress that by 2020, now just seven years away, the U.S. would once again lead the world in the percentage of its citizens with college degrees. That goal cannot be met without reinventing Parent PLUS Loans and the rest of our broken financial-aid system. The challenge is to provide students the loans they need without burdening them with debt they cannot repay.
In fact, without root-and-branch student-loan reform, our number of college graduates is likely not to rise but to shrink. African-American and Hispanic babies and other babies of color born last year already outnumber white babies. As they grow up, they will become a majority of high school graduates. But given the lower average incomes among people of color, they, like their counterparts today, are likely to be short of funds to pay for college.
Inevitably, instead of growing to meet the economy's need for college-educated workers, the number of college students, then of college graduates, will shrink, forcing employers to look abroad to find the workers they need.
President Obama's Obligation
How could the president and the administration, for which education has been a top priority, be on the brink of presiding over a slow slide in college graduates? The president and his secretary of education, Arne Duncan, have remade federal policy toward the education that comes before college, the education that children get from prekindergarten through high school.
But the administration has not been so bold when it comes to higher education. It has supported Pell Grants and direct student loans. It gave college the visibility that came with mentioning it in the president's first address to Congress. And it has called on colleges to lower their tuition.
But rhetoric and patchwork programs don't add up to a comprehensive strategy. And a crisis demands a strategy.
Organizations like UNCF can help. But the crisis is far bigger than even our 13,000 scholarships every year worth more than $100 million can address. The Parent PLUS Loans program alone awarded 1 million loans a year, worth $10 billion. Total student-loan debt is approaching $1 trillion, exceeding credit card debt. We teetered on the brink of the fiscal cliff over less.
If President Obama is serious about increasing the number of American college graduates, and we know he is, he needs to treat the college-financing crisis just as seriously.
Our new strategy will need to be innovative. It also has to be disruptive, in the good sense of changing the dynamics that are pricing millions of Americans out of college. The GI Bill was an example of innovative disruption, sending more than 2 million Americans to college and more than 6 million to training — and fueling the country's postwar economic boom. The Obama administration's K-12 policy has been a model of disruptive innovation, providing incentives for public schools to do better instead of rewarding them whether they succeed or fail.
The particular components of a comprehensive new college-finance strategy ought to be the product of people in and out of the administration. But it has to be calculated to enable college attendance and graduation for the number of low-income students — many of them students of color — that the country's employers will need. And it must avoid saddling students and families with mountains of debt and trapping yet another generation in a student-loan spiral. It should encourage even low-income parents to save for college, not only to pay college expenses but also because college attendance rates are four to seven times as high for students with college savings accounts.
Responding to the crisis in financing college education won't be free, or even cheap. But in the 21st-century economy, supporting college isn't an expense but an investment, an investment in better futures for students and for all of us. It is an investment in a new generation of teachers, scientists, business executives, doctors and nurses and civic leaders. It is an investment in the communities whose schools and streets will be funded by the taxes that college-educated workers earn. And it is an investment in an economy that offers a college-educated workforce to employers around the country and the world.
The Obama administration's K-12 education strategy is a boon to the nation. But it is also a promise: a promise that as administration-driven school reform moves more and more toward college-ready high school graduation, the country will not abandon millions of these freshly minted high school graduates short of the college education that the economy demands.
It is a promise that President Obama — and the country — cannot afford to break.
Michael Lomax is president and CEO of United Negro College Fund. He is a contributing editor for The Root.
If you need more information about programs available to help families finance college education, please send your questions to Dr. Lomax at therootstaff@theroot.com.
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