"A loan program offered to parents financing their children’s college education has been the target of repeated calls for tighter restrictions on eligibility. And a report released Wednesday by the Brookings institution on Parent PLUS loans adds new fuel to arguments for restricting the program.
The report finds that the average loan amount taken out by parent borrowers has more than tripled in the last quarter century, according to the report. And parents with six figures in loan debt make up a growing share of borrowers entering repayment." …
https://www.insidehighered.com/news/2018/11/29/report-finds-parents-college-students-taking-out-more-debt-and-repaying-slower-rates
This whole system needs a proper re-evaluation and better regulations. First, there should be a cap on college tuition, so called “non-profit & generous” colleges with big endowments keep increasing cost as they please. Responsibility of repayment should be on an individual, not on parents or on college or state.
Financial aid should treat every young person the same. Give everyone student loans and opportunities to repay, instead of weighing the system down with freebies and making it expensive for everyone else.
Lowering the cost and making beneficiaries put resources back in the pool is the only way to provide equal opportunity to all.
If people have to pay back instead of counting on system or parents to pick up the tab then they would take education more seriously. Too much non-sense going on on college campuses.
It’s getting scary. I recently spoke with a family who took out a $100k private loan so their child could go to a good instate school and the child is a premed senior. He had a horrible app list for med school, applied very late and has been rejected.
The parents are now upset that the private loan will cost them over a $1000 a month for 10 years. Not sure what they were thinking when they started down that path. Also not sure why they thought that they could afford any significant monthly loan payment when they couldn’t contribute a dime towards college costs in real time.
This makes zero sense to me. Only in rare circumstances would someone not be able to afford to pay even $1000 per year towards college but then suddenly be able to pay $1000+ per MONTH towards loans 4 years later.
This child had the high school stats to get large merit at a number of schools, but never even considered those options. If he hadn’t had the stats, then he could have gone to a CC then transfer or go to a local state school.
Families trying to keep up with the Jones’ because their snowflakes deserve the best. Somehow, the taxpayers will end up eating this for those who didn’t care to read the fine print or assess their finances honestly. Since my kids entered the college years I’ve seen countless, otherwise level-headed, friends take out loans far heftier than they can afford and then are bewildered when after graduation their kid is living at home working for $30K/year. Everyone struggles. But God forbid their child attend the lowly state college or be persuaded to major in a field where they can make a true living.
It boggles my mind. Our son didn’t apply to anything we knew we couldn’t afford. He will come out with just the Federal subsidized and we’re able to pay the rest of his in state school.
My co-worker’s kid is insistent she has to get out of state. She wants to be a pre-school teacher. The front runner is currently an out of state public (all her picks are out of state publics) with no merit offer, no college savings, no home equity. I’m not sure how exactly they plan to pay for this, and how a pre-school teacher will cover those payments upon graduation. But they won’t make the kid apply to a state school.
A few friends of mine didn’t think the schools’ aid calculators could possibly be correct. So let kid apply and then couldn’t say no when kid was accepted.
It does boggle the mind. I expect many of us have had conversations with family, friends and/or clients who are considering large parent plus or private loans to fund their kids’ educations. It is difficult for some people to remove emotion from what should be a rational decision. I don’t know the answer to changing current beliefs and patterns…do people need more information/education? There’s tons of info re:consequences of borrowing online, as well as loan payment calculators on both government and private sites. Do people not believe the data that show many get good educations (and jobs) from colleges ranked even below the top 100? What is the missing piece(s)? Or are people just responsible for their own financial decisions, whether good or bad?
I don’t foresee colleges reducing prices anytime soon. Until there is real competition, in the form of online degrees or whatever other alternative education/degree programs might gain momentum, colleges will continue with current pricing strategies because those strategies are working (and very successfully). And at first, that competition will result in the closure of small privates and directional state universities who won’t be able to attract enrollment numbers necessary to remain viable. The top schools, pick a number, top 500, top 1000, top 1500, will operate with a business as usual mindset for a long time.
My H puts everything in a spreadsheet- it is just how he is processes everything. He created one with my S for all of the colleges he has on his list. Using the NPC they estimated cost. It includes amount we will pay and then his financial responsibility if the tuition is higher. Obviously the numbers are just estimates, but they included likely beginning salary for his degree, rent and utilities, car payment and how much a month a loan payment would be. It was a great exercise for our S and I believe it will definitely impact his decisions.
How do you stop people from making dumb financial decisions? How many wealthy and prominent people died this year and the newspaper reported “they left no will”. Huh? How many people buy an extended warranty on a camera, phone, TV which already HAS a warranty depending on where they bought it and what credit card they used, AND will be obsolete before the warranty expires? How many people pay too much in auto insurance because they want “peace of mind”- by owning a policy which doesn’t protect them in the way they think? How many people are underwater on their mortgages because they added fancy additions to a house in a modest neighborhood?
Lots and lots. People borrow money to pay for a wedding- huh?
The mind boggles at the lack of financial literacy in this country. I see the college loan piece as just one small part of a much bigger problem. My neighbor has health insurance for his dog but no disability coverage for himself even though he is the breadwinner for a family of 5. I could bore you all for days. He’s proud of saving $20/month by not taking his company subsidized disability policy so he can pay for Gold Plated care for an animal…
It seems like there might be two groups that are likely to take out huge parent loans. The first would be those who don’t want to tell their kids no, or perhaps they are just uninformed, and borrow for a college they can’t afford instead of steering them towards a school that is within their budget. The second group would be very low income students for whom any school would be more than their parents could afford. If they have top stats and can get into one of the schools that meet need, or have high enough stats to get top merit scholarships then they can go to school without debt. It gets much trickier for good students who don’t have top scores, which is very common if they are coming from lower achieving schools. There are limited options and their parents or other involved adults may not know how to navigate the process.
Yes, that happens.
More often what happens is this: parents let their kids apply wherever they want with the idea that “in the spring, we’ll put all the offers on the table and see what’s best.” This wrongly assumes that there will be some offers that will work. Oftentimes, NONE of the offers “work”. Too often little or no aid is given. Then, it’s too late, the parents/students don’t want to be embarrassed and do a gap year, so they sign their names to loans and make all the ugliness “go away”… for the time being.
While with a simple googling exercise, one can easily find stories of students/parents drowning in student loans, there’s still too much denial going around. Until folks personally know people whose lives have been turned upside down by large private loans or Plus loans, too many are not going to change.
But, since it’s now commonplace for people to borrow a lot of money for college, soon nearly everyone will be exposed to someone drowning in school debt.
Yeah I have a coworker that will be in debt to the tune of nearly $450k (his estimate) by the time his three kids finish college.
Nevermind that at the time two of them graduated from high school they would’ve been eligible for two years of free community college.
He’ll work until the day he dies.
I know a lot of people who do take on extreme debt because they believe they will eventually inherit enough money to pay it off in one fell swoop. That’s a crazy risk, esp. in this age of expensive long-term care. We shall see how it all works out for them…
^^^
That is especially crazy because likely they’re going to need some of that inheritance for their own retirement years.
Well, that’s two crazy issues.
Why do we let 18 year olds with no money dictate that parents must pay or borrow for their emotional desire to go OOS???
And…omg…to borrow to become a preschool teacher??? To make what??? $25k per year?
@HeartofDixie Without exception, every case I know of is because they didn’t want to tell their kids no. One let her student go to another state flagship at double the COA of our instate flagship which is a significantly better school for a major she could have studied at virtually any university. Said student is now making $15/hour, no benefits.
The hard ones to watch are the low income with good grades but not enough for the 100% need-met schools here in the NE and the instate choices are still out of reach financially. Our instate flagship ($30K with no aid) is more than $20K/year for a family with income in the $40-45K range. How can you do that? Not to mention that the average SAT is 1300 so its not an academic safety for many.
this this this ^^^
We are a generation of parents filled with folks who rarely tell their kids “no.” I think it was @ucbalumnus who once wrote here on College Confidential that facing unaffordable college costs is often first time many parents are faced with having to tell their kids “no” to one of their desires. And too many find that to be too impossible, so they borrow.
Hey UCB…what was your exact quote?
The only reason I even bother posting on CC is to encourage families who are afraid their kids’ futures are going to be limited if they don’t go to the absolute best schools they can get into vs. the schools they can afford. It is possible to help our kids achieve their goals and not go into debt doing it. It may not be everyone’s preferred path, but neither does it mean our kids’ futures are going to be negatively impacted.
omg. That makes me ill just reading it. I can’t even begin to imagine being in that much debt. How in the world do they think they can pay that off?