Parent PLUS Loans Are A Recipe For Generational Financial Hardship
Every parent wants to help their children succeed. Starting a college savings fund when your child is born is an admirable goal, but it simply is not feasible for most parents who belong to a generation where more than half of Americans cannot afford a $400 emergency expense. To make matters worse, the price of college has skyrocketed over the past several decades. In-state tuition at a public university costs as much as tuition at an elite private university used to cost when you were in college. Even worse, even though more and more jobs require a bachelor’s degree, they pay less and less to recent graduates. An increasing number of parents have taken out federal Parent PLUS loans to help finance their children’s college education, and many of these parents are struggling to keep up with the loan payments. A Jupiter debt lawyer can help you if you are struggling with debt after borrowing money for your children’s education.
The Trouble With Parent PLUS Loans
When lenders refuse to lend to you because your debt to credit ratio is too high, it is frustrating because it presents an obstacle to buying the thing you want to finance, but in the long run, it is better than the alternative. If lenders lend you money that you don’t have the means to pay back, it can send you into a tailspin of debt. This is the problem with Parent PLUS loans. Virtually any warm body with a son or daughter enrolled in college can qualify for one, and there is no limit to the amount you can borrow. If you have ten children and they all go to Ivy League universities, you can fund all of their education with Parent PLUS loans, which sounds great until the payments come due.
Income-Based Repayment for Parent PLUS Loans Is Downright Macabre
For students who take out loans when they are in their 20s or 30s, income-based repayment is often the least bad option. Yes, you have to repay a portion of your income every month for 25 years, but at least your loans will be forgiven by the time your grandchildren are old enough to know what money is. Income-based repayment is the same for Parent PLUS loans, but if you took out the loans when your children went to college, it isn’t pleasant to think about how old you will be 25 years after they graduate. Even if you are confident in your longevity, the idea of spending your retirement income on student loan payments is not very appealing. If you can possibly afford it, a personal loan with a repayment term of five or ten years is a better option, even if it means your kids have to go to a less expensive college.
Reach Out to Our Office Today for Help
A debt lawyer can help you think clearly about the consequences of funding your children’s college education through borrowing. Contact Nowack & Olson, PLLC for assistance with your case.