DePaul, Loyola Chicago accused of steering low-income families to take out large loans
CHICAGO - DePaul University and Loyola University Chicago were among the dozens of colleges accused in a new report of steering lower-income families toward taking out hefty student loans while offering big tuition breaks to students from wealthier families.
The list, published by New America, a progressive think tank, included 23 selective private universities and 18 public institutions.
What we know:
The report warns of a "potential subprime PLUS loan crisis is looming," referring to the Parent PLUS loan. More than 32,000 families of students who, in recent years, attended the 41 universities included in the report received Pell Grants, which are federal grants given to low-income students.
Still, those families had a median debt load of nearly $30,000 each, which for many, came close to or even exceeded their yearly earnings, the report said.
Stephen Burd, the author of the report, said the Parent PLUS loan was originally intended to help middle and upper-middle-income families afford to send their children to expensive private colleges. But for lower-income families, "taking on PLUS loans is extremely risky."
By the numbers:
The report broke down the data by school.
At Loyola University Chicago, about 48% of PLUS loan borrowers were parents of Pell Grant recipients. Yet, the average amount of PLUS loan debt the family owed was around $46,446, according to the data.
At DePaul University, about 53% of PLUS loan borrowers were parents of Pell Grant recipients. Still, the average amount of PLUS loan debt held by those families was around $33,000.
Another figure in the report listed how wealthy each of the schools was. While Loyola and DePaul were not listed among the wealthiest universities, defined as having an endowment of at least $1 billion, they still boasted endowments of $929 million and $957 million, respectively, per the report.
What they're saying:
In the conclusion, the report states, "Each year, tens of thousands of low- and lower-middle-income families are encouraged to borrow hefty Parent PLUS loans they likely won’t be able to repay to send their children to selective public and private research universities. The cash-strapped families often have little choice but to take out these risky loans because these schools spend the bulk of their financial aid trying to lure affluent students to campuses to help them raise their rank and revenue."
In a statement responding to the report, a DePaul University spokesperson said:
"DePaul is committed to making college affordable for our students.
Through institutional funds and generous philanthropic gifts, DePaul provides over $350 million annually in academic scholarships and need-based grants to support our students.
The university is transparent with students and families regarding various loan options, and ultimately families make the decision to proceed with loans as they see fit. We clearly differentiate between grants and scholarships, and loans that need to be repaid. Families taking out federal PLUS loans are required to complete loan counseling.
DePaul also participates in the College Cost Transparency Initiative. This means our financial aid offers contain sticker prices, aid types and sources, what students pay and how to renew aid.
Access to higher education is core to our mission at DePaul. That continues to be reflected in our financial aid practices, fundraising, and in every corner of the university."
Loyola University Chicago did not immediately respond on Saturday for comment on the report.