Parent and Supplemental Student Loans

This fact sheet provides information on the Federal Parent Loans for Undergraduate Students and the Federal Supplemental Loans for Students programs. Under the former, parents with dependents who are students may borrow up to $4,000 per year, to a maximum of $20,000. Loans under the latter program are made to independent students (generally those responsible for their own financial support) and are subject to the same loan limits. Eligible borrowers can obtain either type of loan in addition to, or in lieu of, other available federal financial aid, such as Federal Stafford Loans. GAO discusses the (1) volume of loans made to students attending and to parents of students attending proprietary (trade) schools and other postsecondary education institutions, (2) extent of borrowing by parents of freshmen or by freshmen students as compared to such borrowing for students in later years of schooling, and (3) amount of defaulted loans.

GAO found that: (1) 11 guaranty agencies guaranteed nearly $1.7 billion in PLUS loans and $3.7 billion in SLS loans between fiscal years (FY) 1989 and 1991; (2) in 1991, agencies guaranteed $550 million in PLUS loans for parents of students attending nonproprietary schools, with a large increase in loans to parents of nonfreshmen; (3) in 1991, agencies guaranteed $126 million in PLUS loans for parents of proprietary school students, most of whom were freshmen; (4) in 1991, agencies guaranteed $330 million in SLS loans for proprietary school students and $830 million for nonproprietary school students; (5) new defaults, which increased each year during FY 1989 through 1991, totalled almost $109 million for PLUS loans and $1.4 billion for SLS loans; (6) PLUS loan default volume increased the greatest among parents of nonfreshmen students at nonproprietary schools; and (7) proprietary school borrowers accounted for 83 percent of total SLS loan default volume between FY 1989 and 1991.