Stop Taking Parent Loans for Your Kids College Education

You’re a parent, and you are responsible for taking care of your minor child financially. But you are equally responsible to take care of yourself. Taking on student loans so that your child can enroll at the college of his or her dreams s of ever retiring. Or worse.

Contrary to the advice you will get from many college and university financial aid officers, you shouldn’t take out loans to pay for your children’s education under any circumstance. Parents should not borrow money to pay for their kids’ college educations.

Locking eyeballs with the financial breakdown for your son or daughter’s first semester will be painful-even if he or she is attending a public college.

If you opt to pay for some or all of the cost of college via student loans, at the very least, you’ll be paying several thousand dollars per year. It’s not cheap.

Ways Parents Borrow

There are a number of ways that parents can sink their own financial ships by taking on debt for their children’s education. The most common is for parents to take out student loans.

Parent PLUS Loans

These are loans that are taken out in the parent’s name(s) to be used for their child’s education. The problem with that? The federal PLUS loan program allows parents to borrow far more than they can comfortably-or ever-repay!

Private Student Loans

Some parents take out private student loans, usually in their own names but more often as a cosigner on a student loan.

Either way, the parent is 100% responsible for the debt-something that many parents don’t understand, even after sitting in a financial aid officer’s office and checking the box that certifies they’ve read and fully understand the terms of what they’ve just agreed to.

Home Equity Loans

Then there are some parents who resort to taking out home equity loans to pay for their children’s education. Rather than having a student loan, these parents use the equity in their home to pay for college.

While that might sound like a great idea in the short term, it’s not. The potential complications are myriad. Over the years, I have payday cash advance Hicksville New York received more than a few letters from devastated parents who exchanged their homes’ equities for college debt. And then life happened. Kids dropped out of school; parents faced unemployment, health issues, divorce. You get the picture. They couldn’t keep up with the mortgage plus big HEL obligations. Foreclosure ensues, they’re out on the street and their lives are devastated.

The Real Cost

What parents don’t realize is the true cost they bear when they take on student debt. Parent PLUS loans allow parents (and graduate students) to borrow up to the full cost of an education. Only a basic credit check-no underwriting-is used to determine whether the borrower has the income or ability to repay the loans.

Parents who take on Parent PLUS Loans have precious few, if any, forgiveness options. These loans cannot be forgiven under the Federal Teacher Student Loan Forgiveness Program, and for a variety of technical reasons, parent borrowers won’t get relief under the Public Service Loan Forgiveness Program based on their students’ qualifying for forgiveness. These loans cannot be bankrupted, either. The only sure forgiveness comes upon the death of the signer.

Parent PLUS Loans are not eligible for the student’s income-contingent or pay-as-you-earn repayment plans. The standard repayment requirement offers little if any flexibility.

If you think the U.S. government will ever forget your Parent PLUS debt obligations, think again. Until you die, your only option is to repay them as agreed.