Even as they near retirement age, a new report says parents are shouldering an increasingly large burden of their children’s college expenses with warning signs that many are in debt over their heads.
Defaults are rising, and some older Americans are even having their wages and Social Security checks garnished by the government at a time in life when their budgets are already constrained by retirement and health care expenses, according to a Wall Street Journal analysis published Monday.
The Journal took a hard look at the Parent Plus program, a federal loan program established in 1980 that allows parents to borrow to cover tuition and living expenses, often with no limit. The number of families enrolled in the program has more grown by 60% since 2005, with borrowers now owing an average of $22,000 each.
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As of 2015, about 2 million, or roughly two-thirds of the borrowers, were between ages 50 and 64, and another 200,000 were over 65. More than one-third of the loans go to families who also received Pell grants, a program that typically aids households earning below $30,000 a year.
The problem, as the Journal describes it, is that “the government asks almost nothing about its borrowers’ incomes, existing debts, savings, credit scores or ability to repay. Then it extends loans that are nearly impossible to extinguish in bankruptcy if borrowers fall on hard times.”
The report points to September 2015 data released by the Government Accountability Office, which shows about 330,000 people, or roughly 11% of the Americans who’ve taken out Parent Plus loans, have gone at least a year without making a payment.
That rate exceeds the default rate on U.S. mortgages at the peak of the housing crisis, the Journal notes.
Another dire statistic: About 41,000 Parent Plus borrowers had wages, tax refunds, or Social Security payments garnished in the 2015 fiscal year because they fell behind in making their student loan payments.