I just read an article in Forbes called “Parents Are Putting Retirement At Risk To Fund Their Kids’ College Educations” dated April 27,2017.
If you’re thinking of taking loans to help your kids with college, it’s an important read.
39% of parents never get help from their kids to pay back those loans, and end up struggling with the burden on their own.
10% of parents withdraw money from their retirement accounts to help fund college.
Most parents don’t refinance their kid’s educational loans in their kid’s names after graduation…something like 16% don’t even know this option exists.
An increasing number of seniors are defaulting on student loan debt. When student loans are in default, 15% of social security benefits can be garnished.
All of this can add up to a very unstable retirement.
I wondered what people think about taking loans out for their kids, generally? What kind of deal have you made with your kiddo? Are you concerned it will negatively effect your retirement?
What would you do if a child left you to make payment on loans you were expecting them to help with?
We’re fortunate not to be in this position, but I know a LOT of people who are. Thought it might make an interesting discussion. The article was eye opening and deeply concerning.
I think parents or anyone co-signing or taking on debt has to understand it may wholly theirs rather than their child’s. Debt is something that really needs to be carefully considered by parents AND student, with the understanding that resources are finite and if used for education will not be available for other things like housing, transportation and retirement. Educational debt is generally NOT dischargeable in bankruptcy either. Often there are other more affordable options that COULD have worked if the parties were willing but one or more were unwilling.
Yes, I am always quite skeptical when I see (most students) posting in these forums that their parents are planning on taking out large Parent PLUS loans that the parents then expect the student to repay. The federal Direct loan limits exist for a reason. It’s not realistic to expect a new grad to repay very large loans - especially when there’s no legal obligation for them to do so.
My personal (childless, lol) opinion is that parents should only borrow OR co-sign on loans that they are 100% willing to repay using only their own funds. If they want children to borrow money to cover costs for school, then the student should be borrowing federal Direct loans.
@RiverRubicon, you could get better FA is upcoming years, especially at schools that meet need. Income is a big factor in aid. Also, if you can provide proof of your job loss to the FA office, sometimes they will adjust the current year, too.
My kids took direct student loans and were responsible for paying them. I took PLUS loans and paid them off. I also have given my kids a small amount of financial assistance along the way – but for the most part their loans were theirs, mine were mine. I really don’t think it’s appropriate for parents to pass on loan debt to their kids, absent some unforeseen circumstance impacting ability to pay.
It is prudent to choose an affordable school that won’t jeopardize anyone’s financial security or retirement. It’s great your child had some palatable options rather than having to scramble at the last moment for an alternative plan.
I would not take a loan out in my name (or cosign a loan) unless I was fully prepared to repay it. And I would not let my child take out a loan that was so large that I could not comfortably repay it. Better to steer my child to an affordable school than saddle everyone with unaffordable debt. I don’t think parents do their kids any favors by taking out large loans to facilitate “dream school” attendance.
I met a woman in Wal-mart who was bragging about her 2 sons, the doctor and the one earning his PhD this month. Both have incredible jobs, making 2 to 3 times what she makes. She said she’s going to be paying for their educations until the day she dies. I asked her if they help her pay and I was told that it’s a parent’s job to pay for their child’s education. I was floored, but then I realized that everyone has their own vision of what’s right. Personally, my kids were told early on what I could afford and had to figure out their options from there.
^I work with two nurses, husband and wife, each who has to work 60 hours a week to pay the Parent Plus loans they took to send their two daughters to private colleges. Neither daughter has secured a well-paying job, but in my view are mooching off mom and dad while they work 40 hours in “fun” jobs and living in NYC. Dad is constantly complaining how they are in fear of losing their home, can’t afford dependable vehicles and vacations have been off the table for years, neither has any real retirement savings and both in their late 50s. Well, honestly, you reap what you sow. Just another set of parents spoiling their self-entitled princesses.
The world is uncertain for parents too. Job loss, lawsuit, illness, natural disaster, or whatever may very well compete for that extra hundred thousand difference between State and Dream U.
We all want luxury goods - that’s the point of them. But the balance between necessity, affordable luxury, and extravagance is personal. The prudent choices are a little more obvious.
@guidedbywire, it isn’t much better for the student to be burdened by that debt. There aren’t many parents out here who speak against the student taking their federal loans. But getting into larger debt, especially in majors that don’t pay well, is not a path to future prosperity.
Re post #12 – the web site studentloanhero.com appears to be a private, commercial site – and the refinancing options appear to be with private lenders. What that means is that the refinanced loan would not have the protections associated with a PLUS loan:
We have a family friend (widowed) who co-signed loans for all children, using her house as collateral. One of the kids never got her life together, couldn’t pay her loans, and the mother lost her very nice upper-middle-class home and had to move into a low-rent apartment. The other kids tried to help, but they weren’t in a financial position to save the house either.