When private lenders offer loans with double-digit interest rates, minimal underwriting, and no path to bankruptcy discharge, we call it predatory. When the U.S. Department of Education does it, we call it financial aid. The distinction is mostly branding.
Parent PLUS loans are marketed as the responsible way to fund the gap between scholarships and tuition. In practice, they’re a structurally flawed product that disproportionately harms working- and middle-class families chasing the promise of upward mobility for their kids.
The underwriting is theater
The credit check on a Parent PLUS loan is laughably thin. As long as you don’t have a serious recent delinquency, you’re approved — regardless of income, existing debt, or whether you can plausibly repay. There’s no debt-to-income calculation. No assessment of retirement readiness. No cap tied to your earnings.
A 58-year-old earning $45,000 can borrow $50,000 a year for their child’s private college. A grandparent on Social Security can co-sign their grandchild’s tuition into six-figure territory. The federal government does no meaningful gatekeeping, then collects on the back end with wage garnishment and Social Security offsets that private lenders aren’t even allowed to use.
That isn’t lending. It’s a trap dressed in the language of opportunity.
The rates and fees aren’t competitive
Parent PLUS loans currently carry interest rates well above what creditworthy borrowers can get on a home equity line, a refinance, or even some personal loans. On top of the rate, there’s an origination fee — over 4% — skimmed off every disbursement. Borrow $40,000 and the government keeps roughly $1,600 before the money even reaches the school.
Defenders argue the rates fund the broader student aid system. Maybe so. But that means parents of college students are subsidizing federal programs through above-market borrowing costs they were nudged into by their child’s financial aid letter. That’s not aid. It’s a regressive tax collected via fine print.
Discharge is nearly impossible
Bankruptcy can wipe out medical debt, credit card balances, and most private loans. Parent PLUS loans? You’ll need to prove “undue hardship” in a separate adversary proceeding, a standard so punishing that most attorneys won’t take the case. Death of the student doesn’t automatically forgive the loan in every scenario. Disability discharge exists but is bureaucratic and slow.
Meanwhile, defaulting parents face Treasury offset, garnished tax refunds, and reduced Social Security checks in retirement. The federal government has collection powers no private creditor possesses, and it uses them on retirees who borrowed to send a kid to college.
The takeaway
Parent PLUS isn’t an aid program; it’s a high-margin lending operation with a federal seal. Families considering it should treat the offer with the same skepticism they’d apply to a payday lender — read the rate, the fee, the discharge terms, and the collection powers, then decide whether the school is worth it. In many cases, a less expensive school is the only honest answer.
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