One in four American parents who have borrowed from the federal government to help pay for a child’s college education do not expect to retire as planned because of debt, according to a poll to be released on Tuesday.
And one in five borrowing parents regrets taking the loan, according to the NerdWallet survey.
“Parents are doing whatever it takes to get their kids to college, including unaffordable debt,” said Anna Helhoski, student loan expert at NerdWallet, a San Francisco-based personal finance website. Of the total of $ 1.6 trillion in student debt, Americans borrowed about $ 103 billion in PLUS loans in the second quarter of 2021. There are 3.6 million Parent Plus borrowers and the average loan is over $ 28,000.
But parents who borrow for children’s college are stealing future retirement dollars to help fund college, NerdWallet warned.
One in three people who have borrowed from the government Parent PLUS loans say they rely on the forgiveness to help pay off much of their debt.
The government recently opted to extend collection actions on overdue loans by four months, until Jan. 31, 2022. But officials say forbearance is unlikely to be offered again.
As for a greater debt amnesty, “relying on forgiveness is a mistake. They hear about it in the headlines. There is hope there, but there is no law now. President Biden has not pledged a broad pardon, ”Helhoski added.
An October 2020 JPMorgan Chase report that analyzed the student loan debt of over 300,000 Chase Bank customers found that “nearly 40% of people involved in student loan repayments are helping someone else to pay off his student loan debt ”.
A 2017 AARP survey of more than 3,000 adults found that a quarter of private student loan co-signers aged 50 and over had to make a loan repayment because the student borrower did not. not done.
While students have borrowed a lot for their education, parents also borrow a lot to help their children, putting two generations in debt.
“Not only is their child getting into debt, they are also getting into debt,” said Anthony “Tony” D’Angelo, executive producer of Collegiate Empowerment, a non-profit educational company.
Due to the rising cost of post-secondary education and the readily available funding for these college degrees, D’Angelo compares college debt to the subprime housing market, which was fueled by easy-to-obtain mortgages and ever-growing real estate. students. prices.
NerdWallet has discovered that student debt affects families at several stages of life: young adults in debt as they try to build their lives; others close to retirement who see their financial life turned upside down; and retired parents and grandparents who have taken out loans to help a loved one complete their education.
Federal Parent PLUS loans may incur higher fees than private student loans, according to PayForEd.com, a Newtown Square, Pa., Consulting company that tracks the student loan industry. Many parents also don’t understand that a PLUS loan is legally their responsibility, not the student’s.
Parent PLUS loans have a standard interest rate for all borrowers established each May, which takes effect on July 1. The federal parent PLUS rate for 2021-2022 is 6.28%. The parent PLUS loan origination fee can also be higher than private loans, at 4.22%, according to PayForEd.com.
Fred Amrein, CEO of PayforEd.com, which has developed digital tools to help families manage college costs, said that “people over 50 are the fastest growing borrowers.”
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