Couple getting advice from college Financial Aid Officer

Parents: Stop Taking Parent Loans for Your Kids’ College Education

You’re a parent and you are responsible to take care of your 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 may sink your dreams of ever retiring.

Couple getting advice from college Financial Aid Officer

Contrary to the advice you will get from many 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 any 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 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 here are myriad.

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 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. These loans cannot be bankrupted, either.

Parent PLUS Loans are not eligible for the income-contingent, or pay-as-you-earn repayment plans. The standard repayment requirement offers no flexibility. Your only option is to repay them as agreed.

If you think the U.S. government will ever forget your Parent PLUS debt obligations, think again. Between 2002 and 2015, the number of senior citizens having a sizable portion of their Social Security checks garnished to repay education debt soared from 6,000 to 67,300.

If parents strip the equity in their home using a variable rate Home Equity Line of Credit (HELOC)to pay for their children’s college education, they they run the risk of losing their home through foreclosure if anything goes wrong making them unable to keep up with payments.

Better Alternatives

There are better alternatives to parents borrowing for their children’s education. Parents and students need to look for ways to graduate college debt-free. It’s called working and I’m talking about your student here. And there are grants and scholarships—money that is not required to be repaid.

Perhaps it’s time to switch schools. The fact that the fancy expensive school accepted your brilliant progeny does not mean that you can afford it, let alone go there in the same way your son does not get a Ferrari just because he passed his driver test on the first try. Think, people. Match quality with need, and need with the ability to pay.

If after exhausting all options—working multiple jobs, living at home, starting out at community college, scholarships and grants—your student is still are unable to cover the full cost of going to school and there comes a dire need to borrow that cannot be avoided, the student should be responsible for that debt—not the parents. And that student should stick to Federal student loans—never private loans.

Dear Parents

Your kids can get help paying for school, but there is nobody that will help you pay for your own future. Going into debt to pay for a child’s education is not some kind of gift.

The best gift you will ever give your kids is assurance that you will not become a financial burden to them in your old age. If you are not aggressively saving to fund your retirement, that is exactly what will happen. Not a pretty picture, is it?

Dear Students

Learn these two important words: hard work. You are younger, stronger and freer from obligation right now than you will ever be again in your life. You need to have skin in this game which means paying your own way. Step up! I am talking jobs, jobs and more jobs.

Work every holiday break, every summer and during every school year, too—as if your life depends on it. Take any and all jobs you can get.

Take responsibility for this amazing opportunity you have to get an education. Getting your degree will be the biggest thing you will have accomplished in your lifetime, to date. This is serious.

Stop whining and stop feeling entitled to have someone else pay your way.

You may never again be presented with the privilege you are facing now of being accepted into a college or university. This is a big deal. Don’t blow it.

Determine to take the scorched earth approach where no measure to cut costs is too frugal. Live at home if they’ll let you. Be grateful. Demonstrate your appreciation. Cook your own meals. Ride a bike, rent your textbooks.

If you must take on a minimum amount of student debt, there are a lot of future options if the student loan is in your name, including student loan forgiveness and various repayment plans that can lower payments. Do not ask anyone to co-sign a loan with you. That’s the easy way out. Don’t opt for easy. Opt for smart.

In Closing …

Let me close with the story of Debra Crow. As a single parent, she felt overwhelmed and guilty when her daughter headed off to college. There was no education account to draw from—no savings. Nothing.

In desperation fueled by guilt and shame, Debra took on $41,000 in Parent PLUS debt to help pay for her daughter’s education. Now that the debt has come due, she is struggling to make any payments—even the minimum payments are putting her behind every month. She’s looking at many years of struggle, pain and debt-repayment misery.

Debra’s daughter is working for a non-profit organization that would qualify for student loan forgiveness if only the debt were in her daughter’s name. Loan forgiveness does not apply to PLUS loans or private parent loans.

Debra is stuck. She has no way out but to repay that horrific amount of debt plus. To let the loans go into default only sets her up for garnished benefits once she reaches her full retirement age.

If Debra’s daughter had simply taken on the debt herself, she would have had more payment options and quite possibly forgiveness of most of that debt in exchange for her work with a qualified non-profit.

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33 replies
  1. Donna C.
    Donna C. says:

    But there is nothing stopping Debra Crow’s daughter from repaying or at least helping to repay that debt – right?

    Reply
    • Kimberley Hunter
      Kimberley Hunter says:

      The daughter should help. But I think what Mary was getting at was Debra didn’t understand how much a struggle it would be to pay the loan when she signed the papers. She also probably didn’t know that her daughter could get loan forgiveness depending on where she works. Definitely something that should be looked into, probably at the same time certain fields are researched, just to see how marketable some degrees are.

      Reply
    • tboofy
      tboofy says:

      If she’s working for a nonprofit, she might not be making much money. And the point is that legally Debra is responsible for the debt, period. My ex and I consolidated our loans, not having any idea we’d get divorced of course. I’m grateful he was very responsible or *I* could have been responsible for all those loans–the vast majority of which were from his law school. No way I could’ve paid back $100k on a schoolteacher’s salary, but if he had defaulted, that’s exactly what I would have been responsible for. It’s scary to sign your name on any document involving payments.

      Reply
    • Betty Thomas
      Betty Thomas says:

      There is nothing saying that her daughter won’t help. That being said this is still a burden for them both if the daughter helps.

      Reply
      • Mary Hunt
        Mary Hunt says:

        Exactly, Betty. The cost in interest alone has the likelihood of changing the course of Debra’s life.

  2. jenmelkearney1
    jenmelkearney1 says:

    Agree. I am a first-generation college student and was the first of my parents’ 7 kids to finish college – a private university with exorbitant tuition, fees, room and board. We were not savvy at all, but my experience paid off, as my youngest brother knew that it was VITAL to graduate college with little to no debt. I’m still paying off my student loans and will be for several more years, while he’s 14 years younger than me, graduated a few months ago, and already is debt free.

    Now I work at a community college, and I encourage people to start there, or take dual-credit courses in high school or AP courses to get a head start on college credit. Community college is absolutely affordable for someone working part-time, especially if they live at home. They can even work full time over summer and breaks and make enough to pay tuition. (And yes, I know many businesses won’t provide full-time work to students because of the benefits requirement, so two jobs part-time will still get it done.)

    Full-time tuition, fees and book costs at my community college run about $3,000/semester (and that’s top of the scale with the absolute max credit load, and buying new books). Students can complete their associate degree in two years debt free, then transfer to a four-year college or university and finish their bachelor’s degree in another two years.

    When it gets out of hand even at a community college, which is supposed to be the most affordable option, is when people decide that “being a student” is their job, and they take loans to cover tuition, fees, books, their rent and other living expenses … and unfortunately, we see that every semester.

    Reply
    • Mary Hunt
      Mary Hunt says:

      Thanks for this very helpful insight, Jenmel. I love how our EC community here has such a wealth of information, knowledge and wisdom. It’s like we have our very own expert community!

      Reply
  3. Ya But Queen
    Ya But Queen says:

    Growing up, only about a third of high school graduates went to college. (1965) The rest got married and/or went to work. A friend of mine explained years later, that there was the “Stafford” loan. You graduated college and were given a coupon book to pay it back. When my kids were in HS and thinking about college, I thought “GREAT”! I am the queen of “Envelope Budgeting”… even our check book is divided into “accounts” for various expenses. Well, there was no longer a Stafford Loan. The bank wanted us to take out a Parent’s Plus Loan. I looked at her and asked her if she didn’t connect the dots as to why we didn’t have a new car, because we didn’t have money for a monthly car payment. Well, anyway, long story short, our kids went to state colleges, that took tuition in installments. So we paid cash for both kids as they went through, and they graduated with no debt. Of course, college expenses were not what they were then (mid 1980’s). I don’t even see how you can justify college today with all the ridiculous courses kids are allowed and even encouraged to take – some of the latest ones include discovering gender fluidity… Those should not even be allowed to qualify for a degree! My youngest son got his Master’s Degree on his own after graduating college. I know businesses ‘see’ the accomplishment of college as thinking a job candidate has a “stick-to-it” mentality, but, sadly, my experience in the work force only told me that the ‘talking heads’ at the top of the organization didn’t have any practical experience when it came to knowing how things actually worked and could push the numbers around to say anything they wanted.

    Reply
    • Mary Hunt
      Mary Hunt says:

      Your post made me smile, YBQ. Ive also learned over the years that those who are good candidates ofr graduate degrees, most often qualify for scholarships that pay much of the cost. Those who cannot qualify are more likely to drop out—but saddled with the debt they incurred anyway.

      Reply
  4. Henry
    Henry says:

    I am so glad you have the guts to bring this up.
    When I started my investments at the age of forty my wife and I thought it would be good to set up something
    for our grandchildren if they ever would go to college or university. In due time my financial
    advisor dropped this idea without telling us and now I am glad that he did this. Times have changed and
    everything cost now so much more than when we started. My wife still does not agree with this, but as long as
    I have control, it will stay the same. I am 85 and I hope my wife will be able to enjoy what I did for her after I am gone.
    (I have cancer)

    Reply
    • Mary Hunt
      Mary Hunt says:

      Thanks for your comments, Henry. I’m sure all reading join me in praying for a treatment that will put that cancer into remission. Take care of yourself!

      Reply
  5. Pamela Martin
    Pamela Martin says:

    It is not that simple. College costs have risen beyond the point where summer jobs and college jobs will even come close to paying the costs, even for an in state school. Scholarships are easy to apply for, but seemingly impossible to receive. My youngest daughter applied for 20, yes 20, for this fall and heard nothing back at all. The problem is much more complicated that this article can cover, and while I can agree in principle with this, the options are limited. Unlike my student debt, which was mine alone (no co signers required in the late 80’s), there is little that can be done. Getting some college out of the way helps, 2 year Community college programs help, in state programs help (if you can find one that meets your needs) but even that help is limited. Like so many parents, we have cosigned for our kids, and made them get life insurance policies that would cover their loans if (God forbid) anything happened. After 2 years of payments our names will come off. I guess we trust our kids to take care of us the way we have taken care of them. As much as I respect most of the advice you offer and I have taken to heart personally and in my efforts to teach my kids, this time, I think you are a bit out of touch.

    Reply
    • tboofy
      tboofy says:

      Your kids don’t qualify for government-subsidized loans? You must be in a higher tax bracket than most people I know, because most kids qualify for subsidized loans without parents’ signatures. My ex and I combined made it through 10 years of college living on grants, loans, and part-time incomes. Granted, we did have to take out private loans for law school, but a law degree from Duke (my ex) made for a good enough income later to pay them off. My three children have all qualified for subsidized student loans, though they didn’t use them because their dad and I helped while necessary. Granted, only my income is considered for the financial aid, and I only make a teacher’s salary (their dad’s lawyer salary is much much higher).

      Reply
    • Mary Hunt
      Mary Hunt says:

      Pamela … points well taken. However I would be remiss if I didn’t suggest that perhaps going straight to $$ college upon high school graduation is not an entitlement that parents who have not prepared for the cost must somehow find a way to fund for their kiddos. My experience is that kids who must wait for a few years of working and saving and saving and saving … appreciate their education far more than those who enter as freshman quite effortlessly. By the way, check my comment about regarding death benefits for both federal student loans and Parent PLUS loans. Thanks for your comments!

      Reply
  6. hdavey
    hdavey says:

    Parents are NOT responsible for the financial care of legally adult people who want to go to college. If your parents are willing and able to provide that assistance, then it is a grace and a gift from them, not an obligation.

    Reply
    • Mary Hunt
      Mary Hunt says:

      I suppose I should make a clear delineation between a minor child and an adult child. Parents are legally obligated financially for their minors. Whether that includes education is not specifcially mandated. Your comment is right on, however, when it comes to “adults of legal age.”

      Reply
      • hdavey
        hdavey says:

        Mary, thanks for clarifying. I actually know people who have been obligated by divorce decrees to pay for college for ADULT children and have never been able to understand how that can be. And I have known some with the mindset that parents ARE “morally” obligated to help adult children . Not sure where that comes from either.

  7. Jackie
    Jackie says:

    I loved, loved, loved your article on Kids College Education. My daughter signed up for Job Corp and when she finished her training there they housed her and fed her for 2 years of her college Education. At that time we were told we could cover $2,000 a year for her when she applied for a scholarship for the amount Job corp did not cover. They said this and my husband and i are both Disabled Veterans. Instead my daughter whent to the college and was paid to tutor students who were not proficient in English in a couple subjects. That covered what we were supposed to cover and she worked at job corp to cover anything else. She got her associate and after seeing how the teachers were being treated in public school got a job at the local police department all thanks to her training at Job Corp.

    Reply
  8. Tracy J Barger
    Tracy J Barger says:

    Something else that was not brought up is in the event of the students untimely death the parents are still on the hook. I listened to a couple that cosigned for their son to go to engineering school (which is expensive). The son would pay back the loans and of course he would be making more than enough money to do so. He was killed in a car accident a month after graduation. He did not have life insurance and the parents at the time of the interview were losing their home!!!!! Please educate yourselves prior to cosigning and if you do cosign, do it for the least amount possible and carry enough life insurance on your child to pay said loans back in the event of a tragedy. Coincidentally that was why the parents shared the interview so others would not suffer what they were going through!

    Reply
    • Mary Hunt
      Mary Hunt says:

      Oh what a sad story. But there’s one ray of sunshine, if that’s even possible. The law has been changed now, Tracy. This from https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/death: “Your parent’s PLUS loan will be discharged if your parent dies or if you (the student on whose behalf your parent obtained the loan) die.”

      Reply
  9. Douglas Anne
    Douglas Anne says:

    My spouse works at a university that offers a tuition grant for employees’ children. If parents are able to find jobs that offer benefits like that, it certainly helps reduce the cost of a college education. Our daughter has just begun attending a private school for less than it would cost us to send her to a state school as a result of that grant!

    Reply
  10. Amy Hargrove-Sanderson
    Amy Hargrove-Sanderson says:

    I totally agree and if I had to do it again I would probably handle things differently. However, a point of clarification – in some cases Parent PLUS loans can be paid back using an income-based repayment plan and can be discharged. After my husband and I took out some loans for our kids my husband has become disabled. His only income is SSDI and I work 2 part-time jobs. The loans that were in his name have been “forgiven” and the ones in my name are on an income-based repayment plan. There is a mountain of paperwork that has to be done each year to qualify, but it is a must for my situation. I would check the studentloans.gov website for the exact situations that are eligible.

    Reply
  11. Sue in MN
    Sue in MN says:

    Community College! And Work! In our state, community college costs 1/3 as much as state university, 1/10 as much as private school. The first 2 years of most degrees can be fully accomplished there – you student needs to be diligent by taking only credits that will transfer. 24 hours of week during the term plus full-time work in the summer will fully cover the cost, and the school always has a jobs center – often offering work that pertains to their field of interest. One of my kids even continued to save a little toward future college costs while following this plan. Another chose to work full time and stretch her education out a bit. It wasn’t easy, and sometimes we had to come to the rescue to cover a car repair or medical bill. Sunday dinner was made with planned leftovers to feed them through the week… Both now work in well-paid professional jobs and have NO school debt.

    There are some who would argue that their kids will miss the “college experience” of living in the dorm, partying, etc. To them I say that the community colleges offer sports, clubs and other activities for involvement at a much lower cost. If parents really want to help with college, they can use the 2-3 years their child is in community college to save the equivalent of their loan payment every month and contribute that when they transfer to a university or 4-year college. Then, throughout the 2-3 years there make the same monthly contribution. There! You helped your child without going into debt.

    Reply
    • hdavey
      hdavey says:

      So right. I taught at a community college and at a 4-yr school for many years. My experience… unless your kid is one of those super-highly-motivated people who know exactly what they want to do, spending thousands of dollars to send them off to a 4 yr school for the “experience” is nothing but a waste of money.

      Reply
      • Mary Hunt
        Mary Hunt says:

        Community colleges offer a wonderful option to get those first two years’ of basic core classes taken care of! I’m a huge fan. Thanks for you comment, hdavey!

  12. Judi
    Judi says:

    There are a couple other things to help lower costs. Your student can test out of classes too. For example, if they’ve taken 3 or 4 years of foreign language, they certainly can test out of a beginning foreign language class. There is a cost for this but significantly lower than the cost of a 3 or 4-credit university class. And they earn the credit hours! Also in my area, high school students can attend community college for free. Worth checking into. That could help save money on general education classes which all colleges require of their students. Again, significantly lower in cost. And I agree about the working part. Even if you are financially able to pay, make them work 10 hours a week and be responsible for personal needs expenses. This not only teaches money management but another important life lesson – TIME management!

    Reply
    • Mary Hunt
      Mary Hunt says:

      Good points, Judi. However, these tips are not applicable across the board. The Univ of California system has begun to no accept AP course work for credit and or “testing out” of classes. It’s the money. They lose too much when a high school graduate manages to enroll as a sophomore. But generally these are ideas to be explored!

      Reply

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