Student Loan Crisis Busts Retirement Savings

• BobYoMeowMeow wrote on 2012-02-17 16:50

  Parents who borrow money to pay for their children's college education are exacerbating a growing student loan crisis.
  
  Student loan debt amassed by parents is growing faster than loans taken out by the student.
  
  Parents' loan debt has more than doubled over the last decade — exceeding $100 billion dollars or 10 percent of all outstanding student loan debt, according to the independent research firm FinAid.org.
  
  "Parents of every income level are increasingly borrowing for their children's college education. It doesn't matter whether the parents are low income, middle income or upper income. There's been dramatic growth in the percentages of parents who've been borrowing," says FinAid.org founder and publisher Mark Kantrowitz.
  
  Many parents who co-signed loans or borrowed money on their own for their children's education now face the loss of their retirement nest eggs, homes and other assets. As student loan debt has topped U.S. credit card debt, "America faces the very real possibility of another major threat on par with the devastating home mortgage crisis," according to a new study by the National Association of Consumer Bankruptcy Attorneys (NACBA).
  
  Piling up student loans in middle age is "troublesome", says NACBA vice president John Rao, an attorney with the National Consumer Law Center. "Parents who take out loans for children or co-sign loans will find those loans more difficult to pay as they stop working and their incomes decline."
  
  But, parents' need to borrow has grown as their savings has declined and plummeting home values have made it difficult for many households to tap what was once a common financial resource — the equity in their homes.
  
  Parents have an average of about $34,000 in student loans and that figure rises to $50,000, including interest, over a standard 10-year loan repayment period. Interest rates on the most common parental loan — the federal Parent "PLUS" loan — is fixed at almost 8 percent. So the return on parents' investments needs to average at least 8 percent just to break even.　
  
  The fixed-rate PLUS loan is often a better choice for families than private student loans, whose rates may vary. But the need to borrow private or PLUS is often a sign of over borrowing, Kantrowitz says.
  
  "Parents should borrow no more than they can afford to pay in 10 years because they have to worry about their own retirement. By the time they retire, they should have no debt remaining since they will have no income to repay that debt."
  

  
  
  http://www.cnbc.com/id/46386779
  
  The bubble grows larger...
• TA wrote on 2012-02-17 16:56
  Knew this was a bubble ages ago. There's a good video on this that was posted here some months back.
• Elena wrote on 2012-02-17 22:40
  >Why I never let my parents take out a PLUS loan for me. I never needed it. Other loans covered for me, that is until this year, when I was around 1.7K short. My parents managed to find the cash instead, so there's no loan they personally have to pay back.
• Cynic wrote on 2012-02-17 22:47
  And this is why you should never take out a student loan unless you absolutely need it. And even then you really shouldn't.
• ValkyrieHamster wrote on 2012-02-17 23:22
  My parents never took a loan out for me, though they helped with my first year's tuition. But every year after that I took out a loan myself because I felt it was more responsible to not keep relying on the parents. Also loans that students qualify for generally are subsidized and no interest will be accrued till after graduation. Where as loans that parents qualify for have interest immediately.
• RebeccaBlack wrote on 2012-02-17 23:23

  Quote from Cynic;777385:

  And this is why you should never take out a student loan unless you absolutely need it. And even then you really shouldn't.

  
  What do you propose they do instead? People need to go to college and stuff. Should they just have been working since they were 15 and not finish high school until they're 18? What if they still don't have enough money? What if they finished HS early? What if they needed to give the money to their family so they didn't have to be on the street? There are so many situations where someone would need to get a loan for college.
• Bride wrote on 2012-02-17 23:33

  Quote from ValkyrieHamster;777408:

  My parents never took a loan out for me, though they helped with my first year's tuition. But every year after that I took out a loan myself because I felt it was more responsible to not keep relying on the parents. Also loans that students qualify for generally are subsidized and no interest will be accrued till after graduation. Where as loans that parents qualify for have interest immediately.

  
  that's what my parents are doing, or at least trying to do
  
  I'm going to be so in debt once I graduate, but my parents are letting me and my hubby live with them for a while after we return to the US, so I can focus on paying off my debts
  
  :oops:
• ValkyrieHamster wrote on 2012-02-18 01:20
  Yea, I got out of college about 20k in debt. It's now down to about 5k. Yaaaaay! :cheer:
  
  Also 20k is pretty low, I have some friends who owed something like 100k+ because they went to private schools or UCs.
• BobYoMeowMeow wrote on 2012-02-18 04:51

  Quote from ValkyrieHamster;777495:

  Yea, I got out of college about 20k in debt. It's now down to about 5k. Yaaaaay! :cheer:
  
  Also 20k is pretty low, I have some friends who owed something like 100k+ because they went to private schools or UCs.

  
  
  UCs are understandable
  Private schools
  not really
  Top tier private colleges have great financial aid
  and they're negotiable too, you can ask for more money if another private school offer you more
  a $50k/year got trimmed down to about $10k in debt after graduation for some students at Caltech
• BobYoMeowMeow wrote on 2012-02-18 04:51

  Quote from ValkyrieHamster;777495:

  Yea, I got out of college about 20k in debt. It's now down to about 5k. Yaaaaay! :cheer:
  
  Also 20k is pretty low, I have some friends who owed something like 100k+ because they went to private schools or UCs.

  
  
  UCs are understandable
  Private schools
  not really
  Top tier private colleges have great financial aid
  and they're negotiable too, you can ask for more money if another private school offer you more
  a $50k/year got trimmed down to about $10k in debt after graduation for some students at Caltech
• Ithiliel wrote on 2012-02-18 16:07
  Mm...my mother has taken out PLUS loans for me, which I'll be paying back. Honestly I wouldn't have been able to go to college if it weren't for loans. I'm probably about....60k or more in debt thanks to student loans.