We Are Retiring…saddled with College Loan Debt To Add Insult to Injury…Congress Ignores Private College Loan Debt
Investing in secondary education is an additional down payment on the future of America but when parent loans and student loans are considered together, federal student loan policies are driving an inter-generational accumulation of debt that burden the neediest families.’ Typically, African American, and Hispanic families.[i]
Many of us are retired and want to live a good life in retirement. We retire from all walks of life, but we share a common problem. We all love our children and wanted to equip them with an effective education so they could be productive citizens throughout their lives. We also wanted our children to stay focus on a fast start and be saddled down with college debt at the onset of their careers. In many households, student loan repayment is a family affair.[ii]
However it was the parents and grandparents that took out Parent PLUS loans which make up nearly a quarter of new federal borrowing for undergraduates.[iii]
Life did get in the way. We have lived through mortgage defaults (subprime mortgage crisis), repeated economic or financial ups and downs (including high unemployment) so at times we placed these loans in forbearance or asked for a deferment. This would put the payment on hold and the interest still accrues and added to the principal balance. Payments kept getting and higher…
Many of us caved into the relentless ads from private organizations such banks, credit unions, and state-based or state-affiliated organizations, on consolidation of college loans at a lower rate. They teased us with lower monthly payments. You will probably not be surprised to know that many of these promises were false. Many private loan holders did not know or rather the messaging was fuzzy on the fact that Federal Student Loans and Federal Parent PLUS loans have better benefits than private loans. You lose the advantages of federal student loans if you borrow private. Also, private student loans are generally more expensive than federal student loans.[iv]
There are 44.7 million Americans saddled with student loan debt.[v] Total federal student loan borrowers make up 92% of the college loan market (Includes Parent Plus). Approximately 3.5 million parents between the ages of 50 and 64 have college Parent Plus loans. Approximately 65,000 borrowers over the age of 65 held parent plus loans as well.[vi]
Total private student loan debt makes up approximately 8% of the college loan market.[vii] Congress seems to think this 8% is a number not worth mentioning in the conversation on college loan forgiveness. Maybe they should talk with the 3.6 million people represented by this 8%.
President Obama was concerned. Protections and advantages were in place for federal student loans and Parent Plus loans….but not private student loans. In 2015, the Obama-Biden Administration called for Congress to pass a law permitting the discharge of private student loans in bankruptcy. This never happened. President Biden said he will enact this legislation. In addition, the Biden Administration promised to empower the Consumer Financial Protection Bureau (established during the Obama-Biden Administration) to act against private lenders who are misleading students about their options and do not provide an affordable payment plan when individuals are experiencing acute periods of financial hardship.[viii]
Millions of Americans with private student loans have little or no options and are saddled with college debt and payments are due each month.[ix]
For some retirees, these payments amount to over a third of their retirement income. This has a destructive impact on the quality of their retirement lifestyle. It is also a tragedy that instead of higher education achievement narrowing the inter-generational wealth deficit, Parent Plus debt particularly Private College Loan debt has substantially widened it.
Congress needs to include Private Student Loans in their conversation. If investing in secondary education is an additional down payment on the future of America…they cannot afford not to.
Helpful Reference Notes and Comments
[i] New America, Washington, DC, | Wealth Gap Plus Debt Introduction | https://www.newamerica.org/education-policy/reports/wealth-gap-plus-debt/introduction/
Department of Education, Department of Education Announces Action to Streamline Borrower Defense Relief Process. 18Mar21 | https://www.ed.gov/news/press-releases/department-education-announces-action-streamline-borrower-defense-relief-process
[ii] JPMorgan Chase, Student Loan Debt: Who is Paying it Down? |https://www.jpmorganchase.com/content/dam/jpmc/jpmorgan-chase-and-co/institute/pdf/household-debt-student-loan-debt.pdf
[iii] The New York Times (NYT) via Yahoo Finance. Tara Siegel Bernard, ‘A Federal College Loan Program Can Trap Parents in Debt, Mon, June 7, 2021, 8:10 AM | https://www.yahoo.com/news/federal-college-loan-program-trap-121042742.html [iv] What are the Differences Between Federal and Private Student Loans? | https://studentaid.gov/understand-aid/types/loans/federal-vs-private
[v] Federal Reserve Bank Of New York, Research and Statistics Group, ‘Quarterly Report on Household Debt and Credit, 2 0 1 9 : Q3 (Released November 2019) |https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/hhdc_2019q3.pdf
[vi] The Hechinger Report, Meredith Kolodner, ‘Parent Plus Loans are Burying Families in College Debt’ Nov. 19, 2020, | https://www.nbcnews.com/news/education/parent-plus-loans-are-burying-families-college-debt-n1125391
MarketWatch, Jillian Berman, March 9, 2017, ‘College Loans are Making It Harder for Parents to Retire’ | https://www.marketwatch.com/story/college-loans-are-making-it-harder-for-parents-to-retire-2017-02-27
[vii] Source: U.S. Department of Education, MeasureOne, June 2020 and MeasureOne Private Student Loan Report, Q1 2020
[viii] The Biden Plan for Education Beyond High School |https://joebiden.com/beyondhs/#
[ix] CNBC, Personal Finance, The Private Student Loan Market Has Grown. During The Pandemic, Its Borrowers See Little Relief |https://www.cnbc.com/2020/09/15/during-the-pandemic-private-student-loan-borrowers-see-little-relief-.html