The Subprime PLUS Loan Crisis: How Dozens of Universities Steer Low-Income Families to Debt They Can't Afford

Oct 15, 2026

The report explains how Southern public flagship and research universities use large-scale discounting and enrollment-management strategies to recruit affluent students while pushing low- and lower-middle-income families toward unmanageable borrowing. It describes financial-aid leveraging and optimization, detailing how selective schools target the biggest discounts to high-achieving and wealthy applicants, leaving other students’ aid far short of need. The analysis links funding gaps to federal Parent PLUS loans created in 1980 and revised impacts reported in 2026.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages48

Reading Time2 h 1 min

AccessFree to download

Introduction

Making the List

Private Universities

Private University Profile

The George Washington University

St. John’s University

Public Universities

Public University Profile

University of Alabama

Auburn University

Louisiana State University

Conclusion

Appendix

February 2026 The Subprime PLUS Loan Crisis: How Dozens of Universities Steer LowIncome Families to Debt They Can't Aﬀord Stephen Burd Education Policy & Higher Education Last edited on March 18, 2026 Acknowledgments We would like to thank the Joyce Foundation for its generous support of this work. The views expressed in this report are those of its author and do not necessarily represent the views of the Joyce Foundation or its officers or employees. The author would like to thank Rachel Fishman and Sabrina Detlef for their keen editing skills. He would also like to thank Katherine Portnoy, Amanda Dean, and Natalya Brill for their communications, production, and data visualization support. Updated on March 18, 2026: This report has been updated to correct the percent of University of Connecticut freshmen receiving non-need-based aid from 88 percent to 20 percent. [newamerica.org/education-policy/reports/parent-plus-subprime-loans-universities-debt/ 2](newamerica.org/education-policy/reports/parent-plus-subprime-loans-universities-debt/ 2) About the Author(s) Stephen Burd is a Senior Writer and Editor with the Education Policy program at New America, where he has helped shape the organization’s work on higher education policy and on student financial aid issues. About New America We are dedicated to renewing the promise of America by continuing the quest to realize our nation’s highest ideals, honestly confronting the challenges caused by rapid technological and social change, and seizing the opportunities those changes create. About Education Policy We use original research and policy analysis to help solve the nation’s critical education problems, crafting objective analyses and suggesting new ideas for policymakers, educators, and the public at large. About Higher Education We are researchers, writers, and advocates from diverse backgrounds who shed light on the thorniest issues in higher education and develop studentcentered federal policy recommendations [newamerica.org/education-policy/reports/parent-plus-subprime-loans-universities-debt/ 3](newamerica.org/education-policy/reports/parent-plus-subprime-loans-universities-debt/ 3) Contents Introduction 5 Making the List 12 Private Universities 15 Private University Profile 17 The George Washington University 19 St. John’s University 20 Public Universities 22 Public University Profile 23 University of Alabama 24 Auburn University 31 Louisiana State University 33 Conclusion 37 Appendix 39 [newamerica.org/education-policy/reports/parent-plus-subprime-loans-universities-debt/ 4](newamerica.org/education-policy/reports/parent-plus-subprime-loans-universities-debt/ 4) Introduction Public ﬂagship and research universities in the South are thriving, setting enrollment records year after year. National publications marvel at their success recruiting students from around the country, particularly at a time when higher education as a whole seems to be in such dire straits. And journalists and pundits twist themselves into knots trying to explain the appeal of the schools to suburban college applicants from Northern states. Are these students ﬂocking to these schools to enjoy the sun, tailgate parties, and winning football? Or are they, as Fox News would have it, leaving in droves to escape woke politics?1 In reality, there is a much simpler reason. Many of these universities are spending tens of millions of dollars each year—and, in the case of the University of Alabama, $185 million annually—to reel in aﬄuent students from around the country.2 In other words, these schools are oﬀering the best deals to well-to-do students and their families who are shopping around. Take Caroline Ward, who in 2017 was one of more than 200 freshmen from Illinois to receive full-tuition scholarships from the University of Alabama.“Students are looking for those scholarships, and they’re going to take them wherever

FAQs

What problem does the report focus on?

The report focuses on how universities’ aid and recruitment strategies steer low- and lower-middle-income families into debt they may not be able to repay.

How do universities use financial aid to influence enrollment?

They use financial aid leveraging or optimization to set discount “price points” so the schools can enroll targeted groups without overspending beyond necessity.

Why do low-income families often rely on Parent PLUS loans?

Even when they receive some aid, it typically does not cover their full financial need, so families borrow federal Parent PLUS loans to close the gap.

Oct 15, 2026

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