https://www.yahoo.com/news/federal-college-loan-program-trap-121042742.html
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For any particular family, this is something to be careful about before you decide which university to attend.
Graduating high school students are teenagers. They should not be expected to have the financial common sense that you would normally expect from adults. The PARENTS need to act as if they are the adults in the room.
It is highly unfortunate to see our federal government encouraging people to take on a level of debt that they cannot handle.
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Parent PLUS loans can make attending college possible for many low income families. They are a helpful tool in providing access. And yes, people should be careful. But the fact that some people borrow too much doesn’t make it a bad loan.
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Yes, a tool. People misuse tools all the time (just ask anyone who works in an ER). I don’t think the government encourages people to take on debt that they cannot handle-- some people revel in their own financial illiteracy and all the safeguards, warnings, debt counseling, etc. in the world won’t change that.
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Is it that surprising that the page chose an example student who attended New York University?
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Apparently the family STILL didn’t learn their lesson since loans continue to be the main mode of funding for the daughters’ grad school expenses. What happens when they can’t pay those?
Mom and Dad definitely don’t have the cash.
These parents, with illusions of grandeur and NYU prestige,
are plagued with monthly $5k payments for 25 years. Guess prestige is a witch to pay back.
I suspect their daughters wont be making significant bucks any time soon.
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These can be dangerous for low income students. Parents aren’t going to be able to make the payments since they live paycheck to paycheck now.
I think the government needs to reduce the interest rate and eliminate the origination fee on these loans.
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True but their second child attended Manhattanville College. It’s very sad and yet they understood living within a budget except when it came to their kids attending college? Borrowing 6 figures worth of debt is then justified? They live in the NYC metro area (already a HCOL locale), the SUNY/CUNY schools had to have been a better deal tuition-wise.
The article mentions that borrowers assume or expect the government to keep them from borrowing too much yet the borrowers have a mortgage, purchased cars, understand a budget etc….why does all common sense go out the window when borrowing for college is the debt under consideration?
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SUNY and CUNY were my first thoughts.
900 SF home, used cars, budget, yet they let everything go out the window for outrageous loans!
The children are following the parents’ irresponsible lead.
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DH and I had a long talk about this article. I am pretty annoyed that once again tax payers will be left holding the bag when the system collapses like the housing bubble. This time there won’t even be houses worth a fraction of the debt. I don’t understand why there is a cap on undergrad loans for students but not for parents. I can’t buy a $5M beach house because I can’t pay for it. Why are others allowed to borrow money they can’t pay back? It makes no sense.
I feel for the parents because of the stress of watching the debt mount but the reality is they won’t ever pay it back because the money just won’t be there.
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I don’t understand why the kids instead of getting jobs to help their parents also went into debt. Why don’t they feel an obligation to help their parents pay off this debt?
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Sometimes I just have to shake my head in disbelief. How is it possible for a parent be that stupid?
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It’s the same situation as the (2007?) housing crisis, lending more than people can pay back.
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“Even though the cost of tuition seemed insane, I convinced myself that it would all make sense and pay off in the end,” Schweizer, 65,
This is why I cringe every time parents and students start rationalizing COA on CC. We’ve grown so accustomed as a society to thinking of “elite” college as some sort of payoff for a student’s efforts, that they deserve that experience as a reward; common sense often seems to go out the window.
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This money will never be paid back, and reading between the lines (credit card debt leading to bankruptcy, loss of house to foreclosure no doubt through cash out refinancings, multiple rounds of forebearance on the educational loans), the ParentPlus loans have probably not had a material effect on their lifestyle. I’d love to know just how many payments have ever been made.
In other words, they would be in the same financial position they are right now, except the daughters would not have gone to those expensive schools - perhaps not a bad thing, though ($100K+ in debt for utterly nonselective Manhattanville, just wow).
I am of the opinion that parents need to determine what they will contribute. The money can come from savings, current earnings or loans. The key is knowing how much you are willing to borrow. It sounds like these people did things backwards. They allowed their child to choose where she wanted to attend and then borrowed to cover it regardless the cost. They had no control over the debt. In our house we told our children what we would pay. Any loans we may have had to get were ours not theirs. They had to cover the balance of the costs through their own earnings, scholarships, grants or stafford loans. The cost of the university was a definite factor.
Just as it’s important not to give your child a blank check, parents also need to consider is that college is going to cost something. It does you little good to tell your child that you will contribute little or nothing. I agree that the government makes it too easy to ignore the reality of financing college, however, as someone else mentioned the parents should have been more financially wise in their decision making.
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I read this article a couple of days ago and still cannot figure out why these parents didn’t put limits on university cost. We would not be required to take out loans to send our kids to college but budget was still a consideration.
We are in a someone unique situation as Georgia residents where free tuition at UGA and Georgia Tech is very difficult to turn down if those schools are a good fit for your student, but the common sense principle that you should not borrow more money than your kid will earn their first year out of school needs to be a consideration for anyone borrowing money (child or parent) to send a kid to college. College debt can be crippling!
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Even worse is when I see ROI thrown in there. There’s no such thing.
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If I give someone a $500 credit limit on a store credit card, I have to consider their ability to repay the loan by Federal Law. If I give them $80,000 as Parent Plus loan, I don’t.
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Why is this story focusing on parents who took out hundreds of dollar in loans to send their kids to a popular/“prestigious” college, as though this is the face of student debt? Again and again College Debt Horror Stories focus on irresponsible parents who either cared too much about prestige, or couldn’t say “no” to little Timmy or Sue.
It really looks like there is a drive to demonize people with student debt. The fact that this story led with a story of parents who for no logical reason, decided that sending their kids to private schools which cost $70,000 a year makes sense, despite that the most basic arithmetic would have told them that they would end up with a student debt load of over $500,000. Of course, they will likely leave their kids with this debt, so their “brilliant” plan to keep their kids from graduating without debt will backfire horribly.
They also have a person with a $50,000 salary who somehow ended up with $194,000 in debt from three kids who will have the same situation with her kids. For somebody with $50,000 income and 4 kids, OSU costs $10,000-$12,000 a year. For 4 kids that would be $160,000 - $192,000. That is the Columbus campus, and OSU is far from the cheapest option in Ohio. There are many other colleges where her kids would have paid even less.
On the other hand we have parents and students who are taking loans so that they can actually attend a decent 4 year college with a decent graduation rate. Parents with so little money that they need to take $5,000 a year loan to pay for the cheapest option. People who “only” owe $20,000, but are finding it difficult to pay that back with a salary of $40,000 a year.
I really feel as though this article, which supposedly points to the evils of student debt, seems to be intent, instead, on reducing support for student loan forgiveness by painting people with student debt as being in debt due to their own irresponsibility and unwillingness to engage in basic financial calculations.
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