It's not just students who are challenged by college loans. Parents who help their children pay this off are also descending into financial trouble. It is becoming a trend that could worsen the student debt crisis further.
Researchers at the University of Southern California and the University of South Carolina have determined that 13 percent of parents over 50-years-old have assumed the college loan repayments of their children. The debts are from $21,000 to $30,000 or higher and from families with upper-middle and high-income earners. These are families of mostly African-American background with at least two children above 17-years-old, according to the press release.
The researchers also compared data from the Parent Loans for Undergraduate Students (PLUS) for the school years 1995-1996 and 2015-2016. They learned that parents borrowing to finance college fees have increased to 56 percent. From $3.6 billion in loans in the '90s, the amount has almost tripled to $12 billion in last school year, according to the College Board.
"It's very closely linked to rising tuition and increases in the number of kids going to college," the researchers explained the surge. More parents are also likely helping out their children so that they can better start their adult life without any looming debt problems.
FAFSA thinks our parents annual salary is gonna go straight to our college tuition like they don't have bills to pay and mouths to feed...
— College Student (@IostStudent) December 12, 2016
But the experts further determined that the impact is worse among African-American families. "We should be concerned about the parents who are black or who have more kids who are more likely to cope with greater financial challenges throughout their lives than high-income parents."
What this also implies is that parents could be putting off plans for their retirement in favor of helping out their college kids. In fact, data from PLUS also indicate that of the 210,000 parents over 65 with PLUS loans in 2015, a quarter has defaulted in their payments. On the other hand, 7,300 parents over 65 are using their Social Security retirement checks as repayments.
The researchers also said that parents could likely be taking second mortgages or tapping their other assets. If unchecked, they could experience financial instability, which would hurt the most if they no longer have the capacity to work.
