Borrowing for College Costs Can Burden Parents

Parent PLUS loans don't have the same repayment options as federal student loans.

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Erasing debt on notepad.

It sometimes seems cliché to remind readers how fast (and high) college costs are rising and how those costs are being shifted to students, as well as to talk of the burden of borrowing to cover them.

[Read about students paying more college costs.]

But that burden isn't limited to students and graduates; it extends to their support networks who may be assisting with repayment or cosigning a loan. In addition to cosigning, many parents often borrow their own loans. Some parents wish to provide completely for their children's education; some wish to shoulder some of the burden. As parents, they want to help.

Federal parent PLUS loans allow parents to help by filling the gap between the cap in students' eligibility for federal loans and actual college costs; they help increase access to education. But as costs increase so does that gap, which means more parents must borrow, and in greater amounts.

[Find out how much you should borrow for college.]

In "The Parent Loan Trap," the Chronicle of Higher Education and ProPublica reveal findings from a joint examination. They report that last year, "the government disbursed $10.6 billion in parent PLUS loans to just under a million families." That was $6.3 billion more than in 2000. The number of borrowers receiving loans was nearly double. 

And this increasing burden is hard to bear. As the Student Loan Ranger has previously noted, in the first quarter of 2012, approximately 2.2 million people ages 60 years and older held student loans; about 10 percent of those loans were delinquent, and the Social Security checks of 115,000 retirees were being garnished to pay defaulted loans. The delinquency rate for borrowers ages 44 to 49 was 11.9 percent.

[Find out how to avoid delinquency and default.]

Parents may struggle for various reasons. They may have expected their children to be able to help, but with many recent graduates either underemployed or unemployed, that hasn't panned out. Or the parents themselves may have fallen on hard times. 

And parent PLUS borrowers don't have many options if they do fall on hard times. While the loans are eligible for deferments and forbearances, they aren't eligible for Income-Contingent Repayment unless they're part of a Federal Direct Consolidation Loan, and aren't eligible for Income-Based Repayment (IBR) or Pay As You Earn at all. 

The Chronicle reports that borrowers in the bottom 10th income bracket had payments that ate up 38 percent of their income (if they had access to IBR, payments would be capped at 15 percent) and one in five parent PLUS borrowers last year were lower-income. (They'd taken the loan for a student who'd received a Pell grant, which indicates an annual household income of $50,000 or less.) 

Without this crucial relief, parent PLUS borrowers in distress have a harder time avoiding default. Readers can learn more about these options by attending a free webinar or downloading the Student Loan Ranger's new e-book, "Take Control of Your Future."

Other measures that might help with repayment may also be harder to come by in our current economic environment. (Borrowers spoke of selling homes or using retirement accounts.) Parent borrowers with few resources may face a perilous future.

In a New York Times article, "Child's Education, but Parents' Crushing Loans," a borrower said, "It makes you feel like a failure as a parent, to be unable to help your children and to have all your hard work end in a pile of debt."

And as the Chronicle concludes, "PLUS loans can sometimes hurt the very families they are intended to help: the loans are both remarkably easy to get and nearly impossible to get out from under."

But the takeaway here is not to forsake federal loans for private loans. (The Student Loan Ranger has spoken to many cosigners of private loans searching desperately for relief.) 

The takeaway is that parent loans are not the solution to rising costs. As financial aid expert Mark Kantrowitz told the Chronicle, that issue cannot continue to be "magically [swept] under the parent rug." That just leaves us all drowning in debt and, as the New America Foundation's Rachel Fishman asks, "is it true access if student and parents are being saddled with enormous amounts of debt?"

So the Student Loan Ranger recommends you borrow wisely, whether it's for your or your child's education. Consider net price and how much borrowing is too much. And continue to demand a real solution to skyrocketing college costs. 

Radhika Singh Miller is a program manager for Educational Debt Relief and Outreach at Equal Justice Works. She has served on student loan committees in the Department of Education's negotiated rulemaking focusing on the College Cost Reduction and Access Act (CCRAA) and other debt relief initiatives. Radhika graduated from Loyola Law School Los Angeles. Prior to joining Equal Justice Works, she was a staff attorney at the Partnership for Civil Justice, focusing on constitutional and civil rights litigation and advocacy.