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Sunday, October 23, 2016

by Marian Wang, ProPublica.

Parents are increasingly struggling to repay federal loans they’ve taken out to help cover their children’s college costs, according to newly released federal data.

The Parent Plus program allows parents to take out essentially uncapped amounts to cover college costs, regardless of the borrower’s income or ability to repay the loan. As the cost of college has risen, the program has become an increasingly critical workaround for families that max out on federal student loans and can’t pay the rest out of pocket.

Education Department officials have long said that they simply don’t have figures on how many of the loans were in default. But the agency has finally run some numbers. The data shows that default rates, while still modest, have nearly tripled over the last four years. About five percent of loans originated in fiscal year 2010 were in default three years later. The default rate at for-profit colleges is much higher, at 13 percent.

Overall, there is about $62 billion in outstanding debt from Parent Plus, according to the new data. The average Parent Plus loan borrower owes about $20,300. The Education Department compiled the numbers at the request of a government committee that is working on new rules for the program.

As ProPublica and the Chronicle of Higher Education have detailed, the availability of easy money can put individual families in a difficult place, leaving them to choose between taking on debt that they may struggle to repay and curtailing what they believe to be their child’s best shot at building a future. (See: How the Government Is Saddling Parents with College Loans They Can’t Afford.)

The program can be a losing proposition not only for overburdened parents, but also for taxpayers when the government isn’t able to recoup what it loaned.

Consider Lisa, a New Jersey mother living on Social Security disability payments who nevertheless qualified for tens of thousands dollars in Parent Plus loans. (Lisa asked that her last name not be used.) Due to an accident that left her with partial paralysis and chronic pain, Lisa had no expectation that she would ever work again. Lisa took the loans with mixed feelings, but no regrets, determined to help her daughter get the college education that she’d never had.

Documents reviewed by ProPublica show that Lisa is now roughly $45,000 in debt. That’s even with her daughter — currently a junior — having attended a community college for a year, giving her a year’s reprieve from taking on more parent loans. This fall, Lisa’s younger child will start college as well.

“There was a part of me that was definitely terrified, because it’s something that in my lifetime I couldn’t pay back. Let’s be realistic. With what I get, there was no way,” Lisa said, on signing for the loans. But she also felt relief: “Like, ‘Wow, they’re going to give me this money so I can do something for my child.’…You’re like a lottery winner.”

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  • charleo1

    College tuition, like fuel prices, home, and healthcare prices, seem to have joined the elite club of must have staples, where there always seems to be a bit of a game being played between consumers, the institutions, and the Government. That, while trying to help struggling Americans obtain these vital necessities, the Government has inadvertently contributed to, or in the case of college tuition, almost entirely created the spiraling costs that are now running at more than 115% of the stated inflation rate, of 1 to 1.5 %. Some would point out that this is just another example of unintended consequences, when the Government decides to mettle in the free market economy. That easy access to a generous student loan program, with few qualifiers, academic, or otherwise, student loans have ballooned to more than 1 trillion dollars. Surpassing American’s other troubling obligation of of high interest debt, credit cards. But the truth about the student loan program, is like the truth in most everything, it’s complicated. It’s certainly more complicated than Mitt Romney’s answer, of shopping around for a school with an, “affordable,” tuition rate, then get your parents to pay it. But, it’s also an example of the way Government goes about things. It’s where that game that always seems to be afoot, just below the surface. And, it’s
    not Adam Smith’s, “magic hand,” you feel in your pocket. It’s the lack of
    the Government’s realization that simply pouring cash on a problem, without acting like a smart consumer, and demanding discounts for large
    buys. Or, insisting on some common sense cost controls, when what it’s shelling out what is after all, taxpayer money. The T-Party Governor of Florida, where I live, Rick Scott. Asked Florida’s Universities, and Colleges to, “Try and hold tuition costs down.” I’m sure they will Governor. But, it’s really not his program. It’s Uncle Sam’s, and he has done nothing but politely request. Like the cowpoke that stumbles into the Long Branch, and hollers, “Drinks for the House!” The student loan program is full of good intentions, but poorly thought out, and recklessly, dispensed, and it’s putting our youth in deep debt before they even start their careers. That’s if they complete their courses, and come away with a degree. Nearly half inherit the worst of both worlds, loads of debt, that will follow them around until it’s paid, and no degree. It’s something they decided to do, when they couldn’t find a job. And, it probably made their Moms happy. But, too many of these kids never intended to attend regular institutions of higher learning, and are wholly unprepared, scholastically, and thus doomed to fail. It’s institutional child abuse! And,
    you’re paying for it.

    • flyinjs

      So you are saying just end the program because the kids are not smart enough

      • Kurt CPI

        Did you read his post? He said nothing of the sort. See my reply…

      • charleo1

        No, I’m not saying kids are not smart enough. I’m saying, there’s a difference in being smart, and being prepared to
        handle the scholastic rigors involved in a full schedule of
        courses. So, there should be some better qualifers in place.
        And, perhaps help with getting other kids, smart in different
        ways, into trade schools. Where they come out with a trade,
        and certification maybe. I’ve often mentioned my plumber,
        and his license to steal, as a good example of my own wasted youth, attending college. And of course, the experience of having two daughters. One who took to college
        like a fish to water, earning her Masters. The other, after a
        few dead end jobs, quitting them all on the spot. Started her own service business, and is doing marvelously. Both smart,
        just in different ways. I think I also made the point the Government has failed to use it’s considerable clout with
        especially the publicly funded schools, to hold the increases
        in tuition more in line with the modest rate of inflation in the
        broader economy. Instead tuition rates have been allowed to
        gallop, far exceeding any reasonable increases attached to
        anything, but the student loan spigot. My larger point being,
        if we don’t take care of these programs that undoubtedly do
        a great deal in providing the opportunities for lots of kids, who
        otherwise would not have the chance to get their education, and pursue their careers. That if they are allowed to run amuck, they’ll fall to the budget ax. And then, of course, we
        all lose.

    • Kurt CPI

      Right on, Charleo1 !!! What a remarkable bit of telling it like it is. Saddling people with debt to pay for an “education” they never get is indeed abuse.

  • 788eddie

    Education helps everyone. Our country becomes stronger with brighter citizens.

    Education may be expensive, but it’s a lot cheaper than ignorance.

    • flyinjs

      I wholeheartedly agree with you on this. Some folks blame the high costs of education to dummied down students. Our country and its citizens NEED to change their attitude about education…It should be the highest priority period.

  • Kurt CPI

    And what, this is a surprise? In the richest nation in the world we have the third highest tuition costs. So we have now decided as a society that everyone, regardless of academic skill level, should have a college degree. Sn since 95% of us can’t afford the bill, we’re forced to borrow. Now we make that easier by sending questionable students to overpriced schools on monies borrowed (or cosigned) by parents with virtually no qualifications required. between tuition, books and housing a full-time undergrad program can cost between $20K and $35K per year. I don’t know about you, but that’s close to 2/3 of our family’s adjusted gross income. $100K to $140K for a bachelor’s degree? C’mon, how do you spell ridiculous? As I’m writing this I’m reading Charleo1’s post below. I’ll finish my comments in response to his.