Changes in Financial Aid and Student Enrollment at Historically Black Colleges and Universities After the Tightening of PLUS Credit Standards

The federal Parent Loans for Undergraduate Students (PLUS) program provides loans to parents of dependent undergraduate students to help pay for education expenses. To bring the standards in line with those used by banks, the U.S. Department of Education tightened the credit standards for PLUS loans in October 2011. In the first full school year that the new standards were in place (2012/13), the total dollar amount of federal loans approved for parents decreased substantially.

Regional Educational Laboratory (REL) Mid-Atlantic’s Historically Black Colleges and Universities College Completion Research Alliance wanted to know how the tightened standards affected historically Black colleges and universities (HBCUs), which enroll many students from low-income and racial/ethnic minority families. On average, HBCUs have smaller endowments than other institutions and rely more heavily on tuition. Therefore, a reduction in PLUS loans could lead to decreased enrollment at HBCUs, which might threaten the viability of the institutions through reduced tuition revenue. The research alliance asked REL Mid-Atlantic to work in partnership to measure and understand changes in enrollment at HBCUs in the wake of the more restrictive PLUS credit standards. A careful and objective analysis of the PLUS program data should be useful to policymakers in the continuing debate about credit standards for the program.

This descriptive study is the first to examine enrollment changes at HBCUs nationwide following the 2011 change in PLUS credit standards. The study investigates the extent to which PLUS participation and loan dollar amounts declined at HBCUs and other institutions of higher education after the tightening of credit standards. At institutions that experienced a decline in PLUS loan dollar amounts, the study looked for evidence of a shift toward other forms of federal financial aid, such as federal direct loans, Perkins loans, and work-study programs. To determine whether and how the decreased loans affected enrollment, the study examined changes in enrollment at HBCUs and other institutions of higher education in 2012/13 and whether colleges and universities with a larger decline in PLUS loan recipients experienced a greater enrollment change.

The results show that during the school year following the tightening of PLUS credit standards, the share of PLUS participants and loan dollar amounts declined substantially at four-year HBCUs. PLUS loans were not fully replaced by other types of federal financial aid. Enrollment at HBCUs declined as well, and the decline was larger than at other institutions of higher education. The HBCU enrollment decline was especially large for first-year students. Nationwide, enrollment decreased more for Black students than for students in other racial/ethnic groups.