The High Cost of Cultivating Potential in Our Kids

December 8, 2020

?Students aren’t the only ones going into debt to pay for college. So, too, are parents.

Some $101 billion in loans to parents are outstanding through the federal government’s Parent Plus program. That’s $30 billion more than just five years ago. And $10 billion more than two years ago.

More on why and where those students are going to college in today’s newsletter.

? Help us improve this newsletter: Take a short, nine-question survey about NEXT and be entered into a drawing for one of four Amazon gift cards.

? TOMORROW, two can't miss virtual events for parents:

✅ Paying for college. Join me, the head of financial aid at Emory University, and the author of The College Solution: A Guide for Everyone Looking for the Right School at the Right Price at Noon ET for a discussion about how families can find the right financial fit in a college as part of AIG's Financial Wellness Webinar Series.

• Register for free.

✅ Applying to college. At 7 p.m. CT, as part of the Family Action Network, I'll be in conversation about who gets in to college and why with the Wall Street Journal's Melissa Korn. Melissa is also the co-author of Unacceptable, the new book on the Varsity Blues scandal.

• Register for free.
• Plus...if you buy a copy of my book from The Book Stall, a great independent bookstore on Chicago's North Shore, you'll get an invite to a special "after hours" event.

The pressure that families feel to pay huge sums for what they see as the “right college” is real. It’s something I witnessed often while reporting my book. Students and parents—sometimes in tears—visiting their high-school counselors going over financial aid packages with just weeks before a deposit was due for a spot in the freshman class.

What’s happening: The package of grants and loans provided by an institution usually falls short of what’s really needed to pay for college. Many families look elsewhere for help. Often they turn to a Federal Plus loan.

• Some colleges include a Plus loan in their financial-aid packages to make the bottom-line number look more reasonable to families.
• Because the Plus loan is a federal program, parents think of it as another education loan. But it’s really consumer debt, like a credit card (although it usually has better rates).
• Unlike federal student loans, there’s no specific cap on borrowing (dependent undergraduates can only borrow up to a maximum of $31,000 no matter where they go). With Plus loans, parents can borrow up to the cost of attendance minus other financial aid.

Why it matters: Parents have been going to extraordinary lengths to fulfill the college dreams of their kids.

• In her 2019 book, Indebted: How Families Make College Work at Any Cost, Caitlin Zaloom, an associate professor at New York University, calls this phenomenon “cultivating potential.”
• Zaloom found that parents see their kid’s potential as unrealized in high school and only the “best” college can provide the environment for them to explore and develop.

“Parents made clear that they believed they had to suppress their own financial anxieties so that they could allow their children’s potential to take precedence.” -- Caitlin Zaloom

The big picture: Last week, the Wall Street Journal analyzed data on Plus loans, released for the first time by the U.S. Education Department.

• “At nearly 150 colleges, parents typically took out loans worth $50,000 or more, the data show. At more than 500 schools, the median amount they borrowed was between $25,000 and $50,000.”

Student loan debt is often cast as an investment in one’s future. A college graduate has decades to pay off their debt.

• A Plus loan is in the name of the parent, who have half the time—and often less—to pay off the debt before retirement. It’s also siphoning income that should be going to retirement savings during a critical part of life.  

Behind the numbers: While the median amounts in the Wall Street Journal were eye-popping on their own, I wondered about how prevalent the loans were at some schools and how they might contribute to family debt.

• Student debt is a huge political issue, yet there’s so much we don’t know. For example, we can’t tease out a family’s total federal debt burden—how much an undergraduate has borrowed in federal loans along with their parents in the Plus program.
• In digging into the Education Department data further, Scott Smallwood, co-founder of Open Campus, produced an interesting visualization for me that looked at the prevalence of Plus loans at an institution and the overall percentage of students who themselves took on debt.

In culling through his visualization, I found a few examples to highlight here. (I chose Harvard as a counter-example to show how at wealthy institutions few students or parents need to take out loans.)

• Read the Wall Street Journal story (subscription)
• Read another analysis of the Plus loan data by higher-ed expert Robert Kelchen.

SUPPLEMENTS

Unfortunately for many institutions, the months of preparation for the fall academic term have yet to produce any dramatic improvements. Students continue to view online learning as the poor cousin of the traditional in-class experience, according to a survey by Top Hat.

As the COVID-19 pandemic continues to upend the college experience for students and educators, more than half of faculty are experiencing symptoms highly-correlated with workplace burnout according to a Course Hero survey of more than 570 full- and part-time faculty at two- and four-year colleges and universities. 

Plans on paper don't always translate to actions of undergrads. Boston U.'s president talked with Michael Horn and me for the FutureU podcast about his August anxiety coming back, especially after what happened at UNC-Chapel Hill.

Until next time, Cheers — Jeff

To get in touch, find me on Twitter, Facebook, Instagram, and LinkedIn.