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Most parents fail to repay children’s student loans on schedule, Texas study finds
When student loans lead the news, it’s the student cast as struggling. A new study of student loan borrowers in Texas, however, shows that a majority of parents taking out federal loans for their children’s college education also have trouble with timely repayment.
The study, released this month by the nonprofit Trellis Company, found that just 45% of Parent PLUS Loan borrowers in the state complete their repayment without interruption. In fact, among the study’s sample of nearly 60,000 Texas-based borrowers, 31% were delinquent at least once, 8% of borrowers had defaulted, and 7% hadn’t reduced their balance within seven years of starting repayment.
Parents of children attending Minority-Serving Institutions were more likely to experience hiccups in repayment. Just 40% completed their repayment on time, while 10% experienced at least one default, and 8% weren’t able to decrease their debt’s starting balance.
This is a significant problem, especially if we assume that parents in other states face a similar situation. By the close of 2018, 3.6 million parents nationally owed $89.9 billion in Parent PLUS Loans. On the bright side, their annual borrowing held steady during the 2010s after doubling in the previous decade.
“These difficulties appear to have a cascading effect on their broader financial lives,” the study’s authors concluded. “Parents in our study report making significant sacrifices to provide educational opportunities for their children, sometimes jeopardizing their retirement savings.”
How it affects YOU: If you’re a parent considering borrowing on behalf of your student, weigh the pros and cons of Parent PLUS loans before signing on the dotted line. And if you’re already in repayment on PLUS Loans, consider ways to optimize that repayment. Enrolling in Income-Contingent Repayment, for example, could lighten your monthly load.
Also in the news…
- A U.S. Navy veteran due to receive a bankruptcy discharge of his $221,385.49 student loan debt faces a new obstacle: His loan servicer appealed the potentially landmark ruling, according to Yahoo! Finance.
- New York Chief Judge Cecelia G. Morris (who awarded the Navy veteran’s controversial discharge mentioned above) introduced a program for borrowers and their servicers to undergo court-supervised mediation before resorting to bankruptcy, the Wall Street Journal reported on Monday.
- An Ohio law school graduate is being denied the opportunity to practice law in the state partly due to her $300,000-plus student loan debt, Forbes reported late last week. Some states have laws that strip borrowers of their professional licenses if they default on student loans.
- Virginia passed a bill of rights for student loan borrowers through its House on Monday, according to the Virginia Mercury. If it becomes law, it would echo the bill of rights passed at the federal level in 2015, as well as those passed by other states.
- Private lender CommonBond announced a new product Wednesday for borrowers who refinance student loan through the company. The new option — dubbed SmartSave — would see borrowers contribute any cash they saved by refinancing into a high-yield checking account.
- A professional video game player paid off his mother’s student loans thanks, in part, to having 1.4 million followers on streaming platform Twitch, according to a report by PCGamesN.
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