Think twice before borrowing for your kid鈥檚 college
If owing tens or hundreds of thousands in student loans isn鈥檛 what you envision for your golden years, don鈥檛 take a federal parent PLUS loan or another type of parent loan lightly.
Parade participants protesting against high student loan burdens are preparing to take part in the annual July 4th parade at Ashland, Ore., in July 2015.
Randall Mikkelsen/Reuters/File
Sixty-year-old Pamela Last doesn鈥檛 have a聽college degree 鈥� but she has roughly $200,000 in student debt. Like聽, Last took out federal parent PLUS loans to help her now-26-year-old daughter, Reannan, pay for school at the University of California, Santa Barbara.
Last鈥檚 debt started at around $30,000, but it ballooned after she deferred payments for months while interest accrued. It 鈥渓ooms over鈥� her head, she says. And when she asks聽the company that services her debt for advice, she says she gets different answers from different people.
She鈥檚 not the only one who鈥檚 frustrated. About 64% of student loan complaints to the Consumer Financial Protection Bureau from borrowers age 62 and older involve聽dealing with a lender or servicer, according to a聽聽out this week. Almost three million Americans age 60 or older have student loans; 73% of them borrowed to pay for their kids鈥� or grandkids鈥� college education, the report says.
Last says she doesn鈥檛 regret the decision. But if owing tens or hundreds of thousands in student loans isn鈥檛 what you envision for your golden years, don鈥檛 take a federal parent PLUS loan or another type of parent loan lightly.
Student debt gets harder to handle with age
You can鈥檛 transfer PLUS loans to your child, which means you鈥檒l be stuck with the debt until you pay it off. Your child can聽聽through a private lender, but that鈥檚 only an option for borrowers with聽strong credit. It also means the loan would no longer be eligible for聽federal forgiveness programs and repayment plans.
Student loan borrowers are increasingly likely to default as they age, according to the report. In 2015, 37% of federal student loan borrowers age 65 and older were in default, compared with聽29% of borrowers ages 50 to 64 and 17% of borrowers under age 50.
Defaulting on a federal student loan triggers a laundry list of consequences: Your debt will be sent to collectors. Your credit score will suffer. The government can garnish your paycheck or withhold your tax refund to recover your balance. And perhaps most damaging for older adults, the government can take money from your Social Security check.
And then there are the indirect effects of default: With debt to pay, you might skimp on health care costs and retirement savings.
Support your child without going into debt
Minimizing the educational debt you take on for your child聽鈥� or steering clear of it completely 鈥� doesn鈥檛 make you a bad parent. Explain your reasoning, and help your child make the best choices to pay for college. Options include:
- Taking out a federal direct unsubsidized loan.聽Your child will need to apply with the聽. Depending on your family鈥檚 financial situation, he or she聽might qualify for federal direct subsidized loans, too, and possibly grants, scholarships and work-study programs.
- Going to a more affordable school.聽Your child can research schools and compare costs with聽the Department of Education鈥檚聽.
- Borrowing from a private bank.聽This choice is risky, though. Help your child聽learn about both聽聽before making a decision.
If your child takes on debt, help him or her聽learn about how to pay it off. Making payments on a federal聽听辞谤听聽through a private company are both possibilities.
Teddy Nykiel is a staff writer at聽, a personal finance website. Email:聽teddy@nerdwallet.com. Twitter:聽.
This story originally appeared on .