The Parent Trap: Tuition Debt

Student debt snares parents, putting retirement at risk

Terry Williams borrowed about $7,000 to earn a degree from Spelman College 38 years ago. For her youngest child, a sophomore at Belmont University in Nashville, she will take on almost $40,000 in parental loans. Williams, a 59-year-old widow who runs a nonprofit that helps black families navigate private-school admissions, is watching her retirement savings dwindle as she pays college bills for her three children. “I’ll probably work until I fall dead at my keyboard,” says the Decatur (Ga.) resident.

It’s not just graduates who are staggering under the weight of their educational loans. Parents, too, are borrowing record amounts to put their kids through college, jeopardizing their retirements. With the housing crisis, many families can no longer avail themselves of one popular option for financing university studies: taking out a second mortgage. “A plunge in home prices has erased the equity that many homeowners had just a few years ago,” says Greg McBride, a senior financial analyst at

Federally backed educational loans to parents, at an estimated $100 billion, make up just 10 percent of the $1 trillion in educational loans. But they’re growing fast. Loans to parents jumped 75 percent since the 2005-06 academic year, according to data analyzed by Mark Kantrowitz, publisher of the website That works out to an average of about $34,000 for those with loans. With interest, the figure rises to about $50,000 over a standard 10-year period. An estimated 17 percent of parents whose children graduated in 2010 took out loans, up from 5.6 percent in 1992-93, according to Kantrowitz’s estimates.

“Parents are facing an economic crisis because they are borrowing too much for college,” says Rick Darvis, executive director of the National Institute of Certified College Planners. “They’re sacrificing their current lifestyle and robbing their future retirement.” The rising levels of parental debt could ripple through the rest of the economy. By the time parents are in their 50s and 60s, they should be saving for retirement instead of taking on new liabilities, says Joseph S. Messinger, a certified college planner and president of Capstone Wealth Partners in Columbus, Ohio. Also, servicing those loans becomes harder as parents stop working and their incomes decline. “A lot of money is going to the university and college systems,” Messinger says. “It’s shrinking people’s dollars to do other things.”

Most of the parental debt is in the form of Parent Loans for Undergraduate Students. PLUS loans, which are government-issued and carry a fixed interest rate of 7.9 percent, can be used to cover the entire cost of tuition, room and board, and other expenses—minus any aid secured by the student. While parents must pass a credit check, no collateral is required. PLUS loans cannot be discharged in bankruptcy.

Marvin Weinberger, 58, a self-employed inventor of hand tools in Havertown, Pa., owes $105,509 in PLUS loans for his two children. Most of that has gone to cover the almost $49,000 a year in tuition, fees, and room and board for his daughter Ariela, who is a junior at Muhlenberg College, a small private institution in Allentown, Pa. “We really looked hard at the possibility of taking her out of Muhlenberg,” says Weinberger. “It was such a good fit and made her feel so welcome—academically and socially.” His son David, a sophomore at Rochester Institute of Technology, is receiving some financial aid. Both Weinberger children took out federal loans of their own.

Many of the schools with high levels of parent loans rely more on tuition and fees than on endowments. At Trinity College in Hartford, Conn., where annual tuition and fees are $55,450, parents who took out federal loans borrowed an average of $27,000 in the last academic year, according to the school. At Sarah Lawrence College in Bronxville, N.Y., where the annual cost of attending is $58,716, it was about $20,000.

Tuition and fees for private, non-profit, four-year colleges have increased to an average of $28,500 for the 2011-12 academic year, up from an inflation-adjusted $16,276 two decades ago, according to the College Board, a nonprofit group. The trend shows no sign of abating. On Jan. 28, Princeton University announced that tuition and fees for the coming school year will rise 4.5 percent—the school’s biggest increase in six years. Days earlier, Cornell University’s board of trustees approved a 4.4 percent cost increase for its four colleges not supported by New York state. “Colleges will keep doing this as long as the loans are available and as long as people keep applying,” says Laura J. Clark, director of college counseling at Fieldston, a private high school in New York City. “If there’s a dropoff in the number of applications in the middle-income group, that’s when colleges may moderate prices or come up with new strategies for helping people pay.”

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