Should parents take out loans to subsidize their kids’ education?
That’s the million dollar question. But it’s also a question that parents across the country are now pondering amid the college acceptance letters that their high school seniors have now received.
But financial experts say that parents’ decision to finance thousands of dollars to send their child to their “dream” school, may have a devastating impact on their future.
From 1989-90 to 2011-12, the percentage of federal student loan borrowers with parent PLUS loans grew 385%, from 4.1% of all borrowers to 19.9%, according to a new analysis by NerdWallet, the website that offers financial advice to college students and their parents.
The average total amount paid on those loans, including interest, more than doubled in that time, from $15,323 to $40,154.
The Parent PLUS Loans, a federally administered program has long been a favorite among many parents. When the qualifying criteria for the loan changed within the past few years, many students ― including a large number number who attended historically Black colleges and universities ― were forced to drop out of college.
Many of these parents were taking on debt through the Parent PLUS loan that they were unable to pay back in subsequent years, says Nonso Maduka, an analyst for NerdWallet.
“The first step is always exhausting free aid, such as grants and work study,” says Maduka. “The next step is federal loans that offer protection for borrowers and low interest rates.”
Tara and Ryan Lamb, parents of an Atlanta senior remains conflicted over how to finance their son’s college education.
Derrick Lamb, 17, has been accepted to several highly-selective schools, but his father wants him to go to community college for two years and then transfer.
“It’s much cheaper this way,” says Ryan Lamb, who is still paying off his loans from his undergraduate years. “We love our son, but we can’t be saddled with so much debt at this time.”
His wife, Tara, however feels differently.
“If Derrick can just go to school and focus on his work, I’ll be happy,” she says. “I don’t want him stressed out about how much he’s going to have to pay back later. We’re his parents. We are supposed to help him.”
Jamal Eric Watson can be reached at firstname.lastname@example.org. You can follow him on Twitter @jamalericwatson