<p>"Parents who borrow money to pay for their children's college education are exacerbating a growing student loan crisis.</p>
<p>Student loan debt amassed by parents is growing faster than loans taken out by the student.</p>
<p>Parents' loan debt has more than doubled over the last decade exceeding $100 billion dollars or 10 percent of all outstanding student loan debt, according to the independent research firm FinAid.org.</p>
<p>'Parents of every income level are increasingly borrowing for their children's college education. It doesn't matter whether the parents are low income, middle income or upper income. There's been dramatic growth in the percentages of parents who've been borrowing,' says FinAid.org founder and publisher Mark Kantrowitz.</p>
<p>Many parents who co-signed loans or borrowed money on their own for their children's education now face the loss of their retirement nest eggs, homes and other assets. As student loan debt has topped U.S. credit card debt, 'America faces the very real possibility of another major threat on par with the devastating home mortgage crisis,' according to a new study by the National Association of Consumer Bankruptcy Attorneys (NACBA). ..."</p>
<p>The plight of parents paying for student loans has been on my mind, but not much talked about. Figures of how much a student takes out in loans to attend college are readily available, but that number doesn’t take into account how much in parent loans have been taken out. That’s something a parent has to take into account.</p>
<p>I would NOT be happy if a co-signed loan came back to bite me in the bottom…</p>
<p>Can parents get college loans regardless of their ability to repay them? Regular loans are not that easy to get, so one would assume that the lender is pretty confident that the loan for college will be repaid.</p>
<p>Also, $35K-$50K in loans doesn’t seem like “crisis” level to me. That’s about how much many borrow for a new car.</p>
<p>"Also, $35K-$50K in loans doesn’t seem like “crisis” level to me. That’s about how much many borrow for a new car. "</p>
<p>The title to a car is transferable. If one gets in a jam, he can always sell the car (or turn it over to the bank). You can’t sell your college degree (or your kids).</p>
<p>If a parent has good credit & a steady income, it’s pretty easy–almost too easy–to secure a Federal loan for his/her child’s education. The FAFSA does not ask about retirement savings, just what is liquid right now. From that standpoint, the US Dep’t of Education is keeping the ever-increasing college tuition bubble going, for better or for worse.</p>
<p>What will be interesting is if/when the defaults start to snowball. I mean, at 6.3 or 7.9 or 8.5%, that accrued interest can get out of hand for loans deferred or in forbearance, and remember that these loans CANNOT be discharged in bankruptcies.</p>
<p>Whenever you see average student debt stats, they don’t include debt taken out in the parent’s name. There has been a dramatic increase in the amount that parents have borrowed from their retirement accounts, in addition to PLUS and home equity loans.</p>
<p>Well…depending on who is in office at the time, my guess is that when the defaults start to explode, the first thing the administration may be forced to do would be to allow borrowers to refinance these loans at substantially cheaper rates, much like what Obama is doing right now with the mortgages. Especially if interest rates stay low. The government has a good thing going right now with Parent PLUS loans at 7.9% when they can borrow at basically zero interest. Heckuva return on their money lent out. </p>
<p>And they think that they can wait many years to be paid off–thus the flexibility of deferrals & forbearances–even if it means holding off until they think they can get it from a dead person’s estate. BUT…when they see they can’t ‘get blood from a turnip’ (live or dead folks with no assets are bad payers), then they will have to act quickly so they can get something.</p>
<p>My timeframe is 5-8 years for this to start happening. Other scenarios?</p>
<p>I have often wondered whether the average amount borrowed included parent loans. Guess this answers that question.</p>
<p>The article says that parents have an average debt of $34k. That seems like a huge number to me when you look at the average student debt, which I think is around $24k. </p>
<p>I also wonder if the numbers are average debt of those who have debt or if the numbers are an average of all graduates, some of whom have no debt. Hmmm.</p>
<p>Yeah, kayf, and most of those folks are in so much financial trouble that 1-2K is like throwing a deck chair off the Titanic.</p>
<p>Another possible scenario that the government could implement, for those who have the money in IRA’s, 401K’s, etc., what about allowing them to transfer money from retirement accounts directly to paying off the PLUS loans without having to declare that as taxable income? I think a lot of folks are in that boat, and don’t want to take a 28-35% haircut on the money they take out. 'Course, the government loses on that side of it, but least the PLUS loans get paid off.</p>
<p>Can parents get college loans regardless of their ability to repay them?</p>
<p>============</p>
<p>Yes…Plus loans are easily gotten for large amounts without any consideration for how much the parents are earning. As long as they don’t have “bad credit”, then can borrow.</p>
<p>The title should really be “Parents Taking Out Larger College Loans For Their Students”. There’s not really anything about how the increase in parental college loans is affecting retirement savings.</p>
<p>“The article says that parents have an average debt of $34k. That seems like a huge number to me when you look at the average student debt, which I think is around $24k.”</p>
<p>It is a lot worse than that! Those avereages including all of the rich families that are full pay (debt = $0) and all the many low-income kids who are full-ride (debt = $0) and a few merit and athletic scholarship kids (debt = $0).</p>
<p>So, the real number for the kids who actually have debt is a lot higher than the published number of the avereage for all students.</p>
<p>It will be just another bailout. Parents will have to pay a certain percentage back every year depending on their income and after 20 years the rest will be forgiven,</p>
<p>Of course, again, the people who were conservative and sent their kids to a less expensive college will get screwed again and have to pony up to make up for the losses.</p>
<p>What the heck are we teaching future generations about debt. </p>
<p>What a sap I am. Bought the conservative house,sent my kids to lower cost options…stayed within my comfortable debt level.</p>
<p>sax- I don’t understand that. I paid cash for my D’s college by working a second job for over 10 years. I purchased a small home which I easily afford and I live a frugal life. I would not want to be in the shoes of that group no matter what “break” the government may provide.</p>
<p>I would not trade places with the spenders, but I do grow a bit weary of listening to people talking about rich people not paying their share when our tax bill is plenty high enough. I, too, feel as though we have lived frugally and made wise choices. High achieving DD took the scholarship money, and underachieving son was more limited on his applications. However, because of our lifetime habits and decisions, both will graduate debt free.</p>