The article below says that “as older millennials raise children, they may end up taking out new college loans before paying back their own.” Parent loans can have a negative impact on the family for many years after the child’s education has been completed. The article describes how parents, often unknowingly, take on more debt than they can handle in their effort to help their young adults with college. New tools are now available to comparison-shop student and parents’ loans.
“If you have children nearing college age, you’ve probably heard a lot about student loans. Americans owe $1.7 trillion in college debt, an amount that grows every year. And while colleges differ greatly in their propensity to load up families with debt, it has been hard to identify the biggest offenders — until now.”
“The U.S. Department of Education has been filling this information gap with a website called the College Scorecard. It allows students and parents to look up a college, or a group of colleges, to see how many students take out federal loans and how much they borrow.”
Regarding Parent PLUS loans: “Low-income parents qualified for these loans nonetheless because underwriting standards for PLUS loans are lax: Parents are ineligible for PLUS loans if they have a bad credit history, like a defaulted loan or late bill payment, but not if they have no credit history. An unemployed parent with $0 in the bank could borrow $100,000 or more in PLUS loans, even with no credible means of paying it back.”
“The growth of Parent PLUS borrowing means that the student debt crisis that engulfed millennials is increasingly moving backward in time to snare parents with far fewer working years left to earn money for loan payments. The federal government can and does garnish Social Security checks for older parents who default on Parent PLUS loans.”
Student Debt Is Staggering, but Parents’ Loans Are Even More Dire
Elaine Korngold, LPC, offers Financial Therapy to people who want to address and process their money-related stresses. Contact Elaine to learn more.