Americans who feel overwhelmed by student loan debt have had some cause for optimism as members of Congress and the Biden Administration have talked about various student loan “forgiveness” plans. However, the Century Foundation notes that Parent PLUS loans don’t seem to be included in any of these plans.
According to a recent report by the think tank, Parent PLUS loans are “one of the riskiest federal student loan options.” Currently, over 3.7 million American families owe more than $100 billion on these federal student loans that can be taken out by students’ parents and grandparents to help finance their education. It calls them the “driving cause of some of the worst outcomes for families who receive federal student loans.”
Why are Parent PLUS loans so risky to borrowers’ financial future?
These loans were originally marketed to middle-class families. However, they become more commonly used by lower-income families to help their kids afford college, and low-income borrowers often have a difficult time repaying them or catching up when they fall behind on payments. Many of these parents and grandparents don’t have the college education they helped their children and grandchildren get.
Another factor that makes these loans riskier over the long run is that there are fewer limits on the amount that can be borrowed than on federal student loans taken out by students – and higher interest rates. Parent PLUS loans can be for as much as the total cost of attending a college or university.
This can create a “perfect storm of financial troubles,” according to the Century Foundation, for people nearing or already in their retirement years – and beginning to think they may never be able to afford to retire. The average Parent PLUS borrower still owes more than half the loan balance.
Finally, Parent PLUS loans don’t qualify for any of the reduced monthly payment plans. Like regular federal student loans, it’s difficult to discharge them via bankruptcy.
If your Parent PLUS loan debt is overwhelming and you’re having difficulty keeping up with your other expenses as a result, bankruptcy could still be the best solution. You may be able to discharge some of the student loan debt. Even if you aren’t, you may be able to discharge other debts. That can help you deal with your living expenses and non-dischargeable debt. With legal guidance, you can determine the best solution for you.
