The Rhode Island School of Design ranked seventh on a recent national list of colleges whose students' families took out the highest average federal Parent PLUS Loans. The average Parent PLUS Loan for RISD students is $29,255, double the average loan size of RISD students in 2000, according to the list published by the Chronicle of Higher Education and ProPublica. This compares to a national average of nearly $12,000.
The federal Parent PLUS Loan is an unsubsidized loan that allows families to borrow up to the cost of attending a school minus any financial aid the student has already received, according to the loan program's website. The loan amount is not determined by income. A family will only be turned away if members exhibit an "adverse credit history," such as being 90 days late on any debt, defaulting on Title IV debt within the past five years or undergoing a recent foreclosure or bankruptcy. Those who have been sent to a collection agency because of unpaid debt are also no longer eligible for the PLUS loan due to changes made to the program last year, according to the website.
Due to the relative ease with which parents can acquire a PLUS loan, the program allows parents to potentially bury themselves in loan debt, said Simon Moore, the executive director of College Visions, an organization that provides college advice to low-income students in Rhode Island.
"Our general rule of thumb is we encourage families to avoid taking out the PLUS loan," Moore said. He noted that parents can borrow more than their Expected Family Contribution, suggesting that they may not be able to afford loan repayments.
But Anthony Gallonio, the director of financial aid at RISD, said that while RISD topped the list due to the average size of the PLUS Loan taken out by families, a small percentage of the undergraduate population actually used the loan. Eleven percent of undergraduates, or 219 students, used the loan in 2011.
While the average size of the loan has been increasing for the past decade, the number of PLUS Loan recipients at RISD is down from 366 in 2005.
When advising families on their financial aid options, RISD financial aid officers will present all of the available loan and aid options, Gallonio said. But "it's the family that needs to decide which loans are going to be best for them," he said, noting that recently more families are finding lower interest rates with private loans compared to the Parent PLUS loan.
Prior to 2011, the PLUS Loan's fixed 7.9 percent interest rate was often lower than that offered by private education loans, pushing some families to opt for the federal loan, Gallonio said. But as the trend has reversed, some families with good credit and a higher income are finding that private loans may be a better option, he said.
Despite the decrease in loan recipients at RISD and recent efforts to make it more difficult to obtain the loan, Moore said the system remains flawed.
"The PLUS loan program right now offers an out for schools. It allows schools not to take responsibility for not generously funding students through financial aid programs," he said. The problem begins, according to Moore, with the overestimation of the Expected Family Contribution.
"EFCs for low-income families are much too high," he said, adding that colleges end up "asking (families) to pay much more than they reasonably can through a loan that they may not be able to pay off."
Gallonio said RISD does not depend on PLUS loans to avoid increasing financial aid, noting that such a move would hurt enrollment. "For a school who is concerned about overall recruitment and bringing in the best and brightest students, relying on student loans is not an effective way to bring in the best and brightest students in the class," he said.
By comparison, 412 Brown students, or about 6.5 percent of the undergraduate population, used the Parent PLUS Loan in 2011 with an average loan amount of $23,215. Similar to RISD, the number of loan recipients has decreased at Brown from 513 in 2005 while the average loan amount has increased 67 percent since 2000, the Chronicle reported.
Susan Farnum, associate director of financial aid at Brown, said she considers the PLUS Loan a good option because it allows parents to repay the debt over longer periods of time compared to other loan programs and because parents can choose to defer payments until after their child has graduated.
But Farnum said she will not advise parents either way. "I feel like it's not our role in the office to tell a family how to finance their contribution," she said. "It's to provide information about their options."
RISD is not the only small art school that topped the list. The Chronicle of Higher Education noted that a third of the top 25 schools with the highest PLUS Loan awards were art and music schools.
Deborah Obalil, executive director of the Association of Independent Colleges of Art and Design, said this may be due to the higher cost of education at these schools. "They have very specialized buildings and studio equipment and other things that can't be used for multiple purposes," she said. Whereas most schools can use a classroom for many different subjects, art studios are generally specialized for one subject.
She also noted that many of these schools are younger and have smaller endowments. Brown's endowment, which has hovered around $2.5 billion in recent years, is around eight times the size of RISD's endowment, which has fluctuated around $300 million for the past few years according to information on Brown and RISD's websites.
"For students that are committed and serious about doing an art and design higher ed degree, they often have to look at options to make that possible, and Federal PLUS loans are one of those options," she said.
But Moore said many colleges in the U.S. have small endowments but are still able to provide generous financial aid. "It's really a question of what institutional priorities are," he said.
ata-scaytid="18">Gallonio said RISD will not use the program as a crutch even as tuition costs rise in the future.
"I think for an institution like RISD, and I would hope many other institutions, the reliance on student loans, and/or parent loans, is a big concern," he said. "Increasing costs to push onto educational loan financing is certainly not in our vision in terms of helping families finance their education."