Still Paying Your Child’s Student Loan Bill? You Both Need to Read This
A new Student Loan Hero survey reveals some shocking statistics about parents who help pay for their children’s educations.
The survey found 55% of parents who co-signed or took out loans for their children’s education owe $40,000 or more in student loan debt. This includes the debt parents owe both from their children’s schooling and their own student loans.
The worst part is many parents are unaware that they may have options when it comes to their children’s student loan debt. As a result, many are digging into their retirement funds to pay off the debt.
Some Frightening Facts About Parents and Student Loans
Co-signers are responsible for making payments if the main borrower doesn’t. That means a parent who co-signs for their child’s student loan has to pay it back if their child fails to do so.
Parents are also obligated to pay back any loans they took out on behalf of their children, such as a Parent PLUS loan.
Although parents are legally responsible for these loans, that doesn’t mean their children should be completely off the hook.
Too bad many are acting like they are, though.
Student Loan Hero reported that 39% of parents surveyed said their children never contribute to their student loan payments.
About 20% of parents said their children sometimes help out, and 41% said their children always contribute to payments.
So why are we so upset?
First of all, children should thank mom and dad a million times over for helping them receive a higher education.
But secondly, those adult children who never help mom or dad repay student loans might be contributing to a huge problem.
Of parents surveyed, 10% reported pulling money out of their retirement accounts to make their kids’ student loan payments.
Considering Americans don’t have enough saved for retirement to begin with, this isn’t good.
Parents Struggle With Student Loan Refinancing Options
Parents may have options for relief from the student loan debt they took on for their children.
Some parents may be able to refinance student loans in their child’s name — but 64% of those surveyed by Student Loan Hero haven’t considered it, and 16% didn’t even know it could be an option.
Refinancing loans in your child’s name can get tricky, though. It’s contingent on lender approval, and the lender will want to see that your child is able to pay back the loan.
According to the survey, 56% of respondents weren’t familiar with refinancing options, such as Public Student Loan Forgiveness, income-based repayment and co-signer release.
(Another shocking statistic? Seventeen percent of respondents claimed to be aware of the “Obama Student Loan Forgiveness” program — which isn’t even a real thing.)
One option you always have is to work with your child to tackle the debt. Student Loan Hero suggests having an open dialogue with your child about who is responsible for making payments — that way, everyone stays on the same page.
If you’re unsure of refinancing options, check out our beginner’s guide to student loans. It’s a great place to start learning about what you can do to lessen the monthly payment burden.
If you’re not helping out your parents with repayment because you can’t find a job, consider getting a side gig while you look for a full-time position.
Parents and their children need to work together on this — before parents exhaust their retirement funds.
Your Turn: Have you co-signed student loans for your child?
Kelly Smith is a junior writer and engagement specialist at The Penny Hoarder. Catch her on Twitter at @keywordkelly.