Crushing student debt prompts parents to postpone retirement
Patricia Rizzo, 62, owes the federal government more than $ 126,000. But what started out as an investment in her daughter’s future is affecting her own prospects.
A divorced mother, she earns about $40,000 a year working at a drug addiction clinic in New Jersey. She hopes to get an addiction counseling certification soon that could increase her salary, but admits that she is far from zeroing her balance.
“What I’m looking for right now is paying it over 20 years, which will make me 82,” Rizzo said.
She joins a growing list of parents aged 60 and over who are delaying their retirement because of Parent PLUS Loans, a program started in the early 1980s to help parents pay for their children’s college education. A recent NerdWallet survey found that for up to 26 percent of parents or guardians with Parent PLUS, also known as Direct PLUS, loan debt will not go down as originally planned.
Rizzo said she took out seven Parent PLUS loans to pay for her daughter’s eight semesters at Skidmore College in New York City.
She said providing a quality education for her daughter was so important that she moved to the affluent New Jersey town of Ridgewood so that Emily, now 26, could attend public schools in high level. Rizzo encouraged his daughter to attend the best college possible, no matter the cost.
“I felt like for college, I didn’t want to wrong my kids,” said Rizzo, who also has a son, adding that she attended workshops at her daughter’s high school to learn about options. financial aid at the university.
What started as a loan plan for middle-income families has grown into a large-scale program with few restrictions, said Rachel Fishman, deputy director of education policy research at New America, a Washington think tank. .
“You can see parents easily take out tens of thousands of dollars in loans each year,” she said. “And then at the end of an undergraduate career, they can easily rack up over $ 100,000.”
Fishman said she is seeing more and more low- and middle-income families take over.
“What is very different is that this is not a co-signed loan,” she said. “It’s a loan that a parent takes out in their own name; the student has no responsibility to repay this loan.
To qualify for a Parent PLUS loan, borrowers must undergo a credit check, but there is essentially no cap on the amount they can borrow, and parents or guardians can withdraw up to the full cost. of schooling.
“Just because a parent gets the loan doesn’t mean the federal government thinks that parent can actually repay the loan,” Fishman said. “All they did was see if the parent had a negative credit history or not. ”
Parent PLUS loan interest rates are set based on the year they were taken out, but many families borrow more than they can afford, she said.
From 2005 to 2015, the average amount of student debt for borrowers aged 60 and over doubled, according to the Consumer Financial Protection Bureau. Most of this debt goes to their children or grandchildren.
In Rizzo’s case, the interest on his seven loans ranges from 6 to 7 percent. She has not started making payments due to the rising cost of living, other debts and the pandemic. She said she intended to pay but hopes relief will materialize.
After several extensions, the Biden administration suspended student loan payments until May 1, which, in part, freezes interest rates at zero.
Historically, efforts to reduce the eligibility ladder for Parent PLUS loans have been quickly pushed back.
Some critics and experts say eliminating the program in particular or student debt in general would cost the government Billions or even Billions of dollars. An Obama administration effort to reduce the number of eligible Parent PLUS borrowers sparked a backlash from historically black colleges and universities, who claimed affected registration. This decision prompted threats of legal proceedings and a lot critical.
The impact of Parent PLUS loans on borrowers of various walks of life is difficult to quantify, experts say, but the reality is that it leaves many parents and guardians heavily in debt. While officials debate whether to partially or fully write off student debt, a loan can end without repayment in several ways.
They include a discharge, which usually occurs when a borrower dies, is permanently disabled or closes the school where the loans were received; and postponement or cancellation, which are generally related to public service jobs or teacher loan forgiveness programs.
With student loan cancellation pending, Fishman encourages those with debt to prepare, plan, and seek help, including exploring the possibility of a loan consolidation.
Rizzo said her daughter, a 2018 graduate and now a journalist, was eager to help pay off the loans, but the mother wasn’t too worried about it.
“I can’t say I regret it because my daughter has accomplished so much right now,” she said. “I mean she just got the best education.”