Student loans sink Mom and Dad
Some are still paying off their college loans, but a growing number of parents are saddled with student loans they took out to pay their kids' tuition.
This post comes from AnnaMaria Andriotis at partner site SmartMoney.
While borrowers over 40 account for about a third of the nation's $900 billion in student debt, they appear to be struggling with their loan payments more than other age groups, according to a report in The Wall Street Journal.
For example, the delinquency rate -- the percentage of debt on which a payment has not been made for 90 days -- for Americans aged 40 to 49 was 11.9% in March, compared with 8.7% for borrowers of all ages.
Experts say many of those borrowers over 40 are still paying off balances from their college years. But a growing number of parents are saddled with student loans they took out to pay tuition for their kids. Roughly 17% of parents whose children graduated from college this past spring held federal Parent PLUS loans. That's up from about 10% a decade prior, and less than 6% in 1993, according to FinAid.org. (Post continues below.)
The average balance on these loans: nearly $34,000, up 123% from a decade ago.
Meanwhile, more private lenders are demanding parent co-signers on their student loans. Because most students don't have a credit history, lenders say they turn to their parents' credit to determine whether to approve them, and at what terms. Both the parent's and the student's name appear on the loan, and the lender expects payment from either party.
Missed payments will affect both borrowers' credit scores. And if the student can't pay, the parent is on the hook for the payments.
Since the financial downturn, more than 90% of college loans from private lenders have co-signers, says Mark Kantrowitz, the publisher of FinAid.org, which tracks financial aid and student loans. That's up from roughly 50% prior to 2008.
The ballooning of student loan debt for older Americans highlights a key downside to student loans, say consumer advocates: There's no way out. Unlike all consumer loans, federal and private student loans cannot be wiped out after bankruptcy.
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We're told we have to save money for a house... then save money to put our kids through college... then save money to take care of our parents... and then, on top of it all, we're suppose to save for our own retirement.
AND the while we're doing this, we're supposed to be taking care of all the other expenses of life too-- utilities, insurances, vehicles to drive, repairs on the house, clothing, food, furniture, appliances, medical care, dental and eye care, etc., etc., etc. Give me a break! How are we supposed to do all this, especially those of us living on a modest income? For most of us, doing all this is impossible.
You know who came up with all this? Banks, colleges, and nursing homes.
Starting from the first day of high school, Mom and Dad should have been both consistent and persistent with how the college thing was going to go down: You will do all the work necessary to apply for as many sholarships or grants you can apply for, you will work while you go to college, to expect financial help from us, on the rare occasion we chose to help, you will have a B average or better or forget it. If these simple rules would have been set in advance and understood by all, then the choice of college, field of study, how much one would be willing to go into debt would have worked itself out with no one, after graduation, being insanely in debt.
Also, colleges and universities are raping America.
Here is another reason why we are in such financial trouble. Great example for your kids! If you can't afford their education at the front end, go to a state school and have them get a job and pay for it themselves!!!
Common sense seems to be a dying thing these days.
And no i'm not a 1%, I work two jobs to pay my bills and support my family. I stick to sentence #1 and in my lifetime it has served me well so far.
Dont blame those that take out loans to get a better life--with more jobs being shipped overseas it is increasingly either work in some service industry job barely making it or take out tons of $ to try and make a stable life. I just graduated law school and got a decent job. Cost me quite a bit despite working full time during undergraduate and clerking throughout law school. I will be living about the same as before starting down this path but at least there will be better benifits and opportunity for growth someday. The secondary education institutions in this counrty are totally out of control. They are to blame. Our law school raised tuition and let a record number of students in two years ago--the worst year of the recession. And the government paid big time in student aid to send students there. Ethical?
A father there paying a loan i signed for so my daughter could finish college. The agreeement was she would pay it when she finished school. Guess what, school is done and no job so i am on the hook for the payment. My sugguestion is to any parent, dont sign for a student loan. I have bills of my own to pay and took at $50,000.00 pay cut. Thats life
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