Helaine, About 12 years ago, my son wanted to attend an out-of-state school with a high tuition. I foolishly took out a parent Plus loan to cover his school and expenses, since we couldn’t afford it on our income. This was on top of a federal loan I was paying for my own education. At some point, we consolidated the two loans to get a lower interest rate. Long story short: My husband died, my son had job problems, I am only able to work part time due to health problems, and the loans have been in forbearance for several years. Because they are parent Plus loans, they are not eligible for income-based repayment, and the payments keep going up. If I started paying on them now, the payments would take up half my monthly income, which is impossible. My son is planning to pay his portion, but he’s come up against major home repairs and can’t make payments now. I know at some point I’ll run out of options to delay payments and the loan will come due. At that point, I will be looking at retirement and will not have a lot of income available. I have some savings, no debt besides this large loan, and would be in good financial shape but for it. I’m getting panicky about the repayment and have tried to work something out with the lender, but to no avail. I know my son can begin paying in a couple of years as long as he has a job, but his company is going through some problems now and he doesn’t know from day to day whether he will be employed. If I default, will they garnish my Social Security or the equity in my home? What do I do?
No one begins attending college thinking that a decade out they’ll be working an uncertain job, like your son. And few, like you, think their spouse will die and they’ll suffer from ill health, taking such a financial hit that it’s all but impossible to pay back student loans. We’re asking people to make decisions that can only certainly work out if they can predict the future. That’s why politicians like Bernie Sanders argue for free public college tuition and why Hillary Clinton is advocating for plans to permit student-loan borrowers to refinance their debt at current, lower rates. Why, after all, make people’s financial lives more burdensome when all they wanted to do was better their lives and the lives of their children? But this is our system, at least for now. You need to figure out how to best protect yourself within it.
If your son is doing well enough to buy a home, he can help his mom pay for his own college education.
So what to do? “That’s a tough situation, no question about it,” says Barry Coleman, senior director for student loan counseling at the National Foundation for Credit Counseling. “A challenging one,” adds Nick Demeester, manager of student loan services at GreenPath Financial Wellness. No disagreement there!
Nevertheless, both Coleman and Demeester beg you not to default. Your home equity would likely be safe but not your future Social Security check, not to mention any salary you earn in the meantime. Those could be garnished—and the Social Security payment would take the hit at a time when you’re no longer working and need the money. Moreover, it’s possible you aren’t totally bereft of options. Parent Plus loans are eligible for something called Income Contingent Repayment. It’s not as generous as Income Based Repayment, but it’s certainly better than going into default. Your eligibility likely depends on the details of the consolidation. You could also look into refinancing the loans with a peer-to-peer lender like SoFi. They generally offer lower interest rates if you’re a good credit risk. That might bring your bill down to a more manageable level as well.
But there’s one other thing. Mom, I’m sure you did a fine job—your son is a college graduate and is holding down a job in our forever-recovering but not recovered economy. But home repairs? As someone who has owned more than one home, I can tell you the expenses are indeed never-ending. But many are also quite discretionary. Yes, a busted water boiler needs to be replaced. A paint job can likely wait. You get where I’m going here. If your son is doing well enough to buy a home, he’s doing well enough to help his mom pay for his own college education. I know it’s not easy for a parent to ask a child for financial help, but I don’t see that you have a choice. In fact, if he’s as upstanding as you believe, he’ll likely be horrified to discover his education put
Parents need to be smarter about finances. We cannot co sign for loans if we cannot afford to pay them back. I've known people in similar situations. They think it is wonderful that Jr wants to go to some nice school out of state and encourages them to do so. They co sign loans and then something happens and they are stuck. It is a very dumb financial choice and one that can be avoided. And how about teaching your kids to live within their means. Go to a school closer to home that is cheaper.
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Sometimes you're the windshield, and sometimes you're the bug.
Well, i have no intention to get those kinds of loans if i can avoid it all. I told my kids, you may go to the college of your choice, provided that it also a college of MY choice in terms of tuition, costs, etc. My oldest went to a local 2 yr program and lived at home. My younger son is going to a branch campus and will live at home for 2 yrs. The plan is the same for DD as well. 2 yrs saved on room and board is significant.
And, not everyone should go to college. First of all, i don't think college degrees pay out anywhere near like they used too. But, on the other hand, if you don't have a degree you can't even get much of a job at all.
