The state of student debt in 2016 is alarming to most parents:
- Total student debt held by Americans: $1.26 trillion.
- Average debt for a 2016 graduate: $37,172.
- Average monthly student loan payment for borrowers ages 20-30: $351
- Number of borrowers in deferment: 3.4 million
- Number of borrowers in forbearance: 2.7 million
Debt is a tool, but one that has been badly misused and misunderstood in the past years when it comes to paying for education.
Parents are at Risk
Parents are not exempt from the dangers of student loans.
Parent plus loans have very few restrictions and are available to pretty-much anybody, meaning they are vastly over-used and have left many parents unable to pay them back.
About 5% of parent borrowers are defaulting on student loans for their kids.
Similarly to student loans, a parent plus loan cannot be discharged through bankruptcy, and if you are in default the government can seize tax returns and Social Security payments.
In addition, if you have co-signed on a private student loan for your child, you could be eligible to pay back that loan if your child cannot, even if your child is dead or permanently disabled.
Where Do You Turn?
For parents and students who are currently struggling to pay down debt, an income-based repayment plan is usually going to be a better option than going into forbearance or deferment, although there are some drawbacks to those plans as well.
The wisest thing you can do is avoid the student loan problem altogether, by helping your student choose a school that is a good fit for them academically as well as financially, give them the best odds of graduating into a career they enjoy that will support them.
Ready to get started?