US Student Loan Debt, the Price to Parents

US Student Loan Debt, the Price to Parents

US Student Loan Debt, the Price to Parents

According to US student loan debt statistics, Americans owe a staggering $1.3-T in student-loan debt, and the average Y 2016 graduate owes $37,172.

It goes without saying that the burden of debt can be stressful and worrisome. Unfortunately, the headache of paying back a student loan can also fall on the shoulders of parents.

There are a few options when it comes to paying for college.

These financial-aid options include grants, scholarships, loans, and work-study programs. More than 67% of students receive some sort of financial aid, and more times than not, this money is borrowed from one or more lenders.

One way of borrowing money for college comes in the form of federal Parent Plus loans. These are loans made directly to the parents of students, and the parent is fully responsible for paying off the debt.

These loans are not ideal and should be obtained as a, cautious, last option.

By last option means when all other federal resources have been exhausted. While these loans are virtually unlimited, they are handed out without regard to a parent’s ability to pay them back. A parent’s income is not taken into account.

To a lot of parents, this may seem like a “quick-fix” opportunity, and this is why 4.9% of parents whose child is attending a 4 -year public school fall into this trap.

Remember, if something sounds too good to be true, it probably is.

The terms for a Parent Plus loan are a lot less generous than other student loans, here is why:

  1. the interest rate is 6.3% with origination fees of just over 4%
  2. there are a limited number of repayment options and Parent Plus borrowers are not eligible to repay through the income-based repayment programs.

This is where the nightmare of repaying the debt begins.

The 1st payment is due either 60 days after the loan is disbursed or during the application process. The parent may elect to have the payments deferred until after the student has graduated, but either way, when that bill comes, it will be a big one.

Many parents pay upwards of $1,000 a month to repay these loans, and to the average American family, that means financial disaster.

Let us not forget, many college students do not complete their degree in 4 years. If a student is not responsible, and driven, it may take 5 years or more to graduate.

Guess what that does to the monthly payments?

What if you cannot afford to make these payments?

Well, that is your tough luck because the government will come after you in any way possible. The federal government is able to garnish wages, rescind tax refunds, and even dock Social Security checks in order to collect the debt.

So, again, be careful when considering a Parent Plus loan. Do your research the best that you can because data on these loans is hard to find, because it is as if the feds want to keep the statistics secretive.

Yes, Knowledge is Power, and Knowledge is Expensive

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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