Thought about this question when I saw the thread about kids dating someone with lots of college debt. Students are limited in the amount of loans they can take, and yet we know many kids who reference graduating with a lot of loan $$ that they will personally be paying back.
My mom took loans on my behalf when I attended college, and I made most of those loan payments upon graduation. Just curious about what others think or plan to do. Do you make an agreement with your kid(s) that they will repay all or part? Or do you (like the banks/loaners) see this as a parental responsibility?
We took out some low interest loans available as part of daughter’s financial aid package - it was done with the explicit understanding that we, the parents, would pay them off. Which we did. I wanted my children to graduate from undergrad debt-free. Which they did.
My D only took out the subsidized government loans during undergrad. There were other unsubsidized loans offered. I told her to not take those. I refused to take out a parent loan or to cosign loans for her.
She worked 20+ hours a week at a pizza place and usually took 18 credit hours. She completely paid her own way and expects to repay her loans once repayment starts when she is done with med school.
I am hoping to be able to make the payments on her undergraduate loans while she makes the payments on the med school ones.
We expected to pay whatever costs were incurred in obtaining our kids’ undergrad educations and we paid as we went through a lot of juggling and a bit of prudent investing. If we had taken on debt, we would have discussed and agreed with kids before taking on the debt if we needed them to shoulder any of it.
We committed to covering our kids’ undergrad educations and told them we considered their subsidized loans to be part of that. Generous financial aid made further loans unnecessary, but we would have taken them out and repaid them if it had come to that. Both sons graduated with a comfortable combination of savings and income and told us they wanted to take care of the debts themselves.
I made my son take a loan when he received a less than 1.5 GPA one semester. At the end of college his gpa met my “minimum” and I paid off the loan. Original plan was kids would pay above cost of in-state tuition room and board, but at the end of the day we paid for everything during undergrad.
The family can make any agreements among its members, but remember that lenders aren’t part of those agreements. If the parents want to pay the loans taken out by the student, great. If the parent dies or decides not to pay, the student must pay the loans taken in his own name. If the student agrees to pay the Parent Plus loans, the parents are trusting that that will happen, but the lender won’t care. It expects to get a payment from the parent every month.
Also, the loans cannot be combined so there would be 2 payments if either the parent or student is paying the other’s loans, and the loans taken by the parents wouldn’t be eligible for IBR based on the student’s income.
In addition to comment above, as sad as it may be, if parent co-signs for student debt, and student dies, parent is responsible for paying debt.
It’s good to have life insurance on all signatories—just in case there is a death, as the debt will generally remain and fall heavily on the remaining co-signers.
Personally speaking, parents who are able but whom don’t pay for there children’s college just continue the cycle of putting your offspring behind the 8 ball of debt, limiting there opportunities for upward mobility.
The most upsetting threads are those where parents REFUSE to allow the students to choose schools that are local and less expensive but “insist” on the big name very expensive Us that neither they nor the student can afford. It’s heartbreaking reading those threads and assuming they are true is an awful way forward for the student. In such cases, there are no good answers short term. The student has to go elsewhere and become independent until age 24 and then apply where s/he can afford avoid crippling debt.
How about beyond the bachelor’s degree?
We were fortunate enough to help ours graduate nearly debt free from undergrad. But then…
Youngest took out some big loans for a grad program that doubled her income. We have been helping her pay those down and I believe between her payments and ours she will be done within a few months.
Middle kid was also stuck in low-advancement job and we helped her pay for a coding school that got her a much more lucrative job. She is paying off the rest of the loans very quickly.
It’s a touchy area when your kids are fully fledged adults.
@dragonmom We would absolutely help as much as we were able beyond a bachelor’s, especially under the sets of circumstances you describe your two experienced.
@dragonmom, if you can help without hurting yourself financially, I see no reason not to help an adult child with grad school/post-grad education. None at all.
My kids took out subsidized loans up to the max they were allowed, and I took out PLUS loans. The PLUS loans were my responsibility and I paid them off after my kids graduated. Both my kids were employed & self-supporting immediately after college grad, so paying down the loans wasn’t difficult-- I just shifted the dollars in my budget that had gone toward supporting the kids to paying off the loans.
My daughter & son took out loans on their own for grad school; I did not contribute. Both had worked for several years between undergrad & grad, so had established employment histories and a pretty good sense of what they could manage.
I looked at the parent PLUS loans as a way of financing my end of the deal, not extending beyond what I could afford. I would not have borrowed an amount that put my own financial security at risk. I looked at my own net worth in terms of figuring out what I was willing and able to borrow.
I did not ask my kids to take out unsubsidized loans. A limited amount of money at -0- interest while they were in school seemed like fair deal, especially since they were choosing more costly options than the in-state public would have been. But the federal limits on subsidized loans seemed to me to closely equate with the maximum that I think most undergrads should take on. I didn’t look at it in terms of how much they might be able to earn post-college-- I looked at it in terms of what their earning capacity would have been at the time they took on the loans, if they weren’t in school – together with what the monthly payment would be on the loan.
I agree. D1’s Ph.D was “fully funded,” but her stipend was nevertheless quite low in our opinion. We payed her rent for most of that time.
We are paying D2’s law school/MBA program at a private school. If we couldn’t, we wouldn’t and would feel no guilt about it, but since we can afford it, we happily do it so that she can start her professional life with no debt. I don’t see this as “touchy area” at all. JMO.
We made S1 take out loans for grad school because he liked living a high lifestyle and we thought he needed to manage his money better. He got his MA after a year and within 3 years he was paying his loans, saving some money and living below his means so we paid off those loans (about $25K). DIL is much better at money than S1, so we paid off her loans their first year of marriage (about $28K).
D1 is in dent school, so she has loans for tuition and fees; we give her a stipend for living expenses. However, she’s getting married this summer and the stipend will stop (except for health insurance). We may contribute to repayment in a few years, but her income should be high enough to repay the loans.
I’ve read a few cases where parents decided to take the loans… but they can’t pay them, so the graduate is living home to get the loans paid (and in one case rent too).
We do know parents who have taken loans with the understanding that the graduate (engineering and CS ) will be making the payments… but the loans are in the parents’ names and this plan could certainly go wrong in any number of ways…
This is true for private loans, but for the Plus loans, if the parent or child dies, the loans are forgiven. That is one difference that people should check out when comparing Plus to private loans. Of course everyone hopes no one will die.
NJ also has a state loan program and there were a few situations where the child/student died and the parents were furious that they had to pay the loans. Well, they parent borrowed the money and agreed to pay it back. Forgiveness on death wasn’t a condition of the loan.