Parents hope for forgiveness on student loan as they battle debt debt
It is not just young adults who are struggling with the burden of student debt; parents are also struggling.
A new report released today by NerdWallet illustrates the general and ongoing difficulties facing Parent PLUS borrowers. Parent PLUS loans are a unique type of federal student loan where the parent borrows on behalf of their child who is pursuing an undergraduate education. The parent, not the student, is the only borrower responsible for repaying the loan. Parent PLUS loans can have much higher interest rates than other types of federal student loans and fewer repayment options. Generally, Parent PLUS loans are excluded from income-tested repayment plans (although they may access a less generous income-based repayment option in certain limited circumstances).
Between inflated interest rates and more limited repayment flexibility, Parent PLUS borrowers are increasingly struggling. In its Harris Poll survey of 2,000 adults, including 130 Parent PLUS borrowers, NerdWallet reported the following:
- 34% of Parent PLUS respondents are unconvinced that they will be able to resume payments once the nationwide student loan payment hiatus ends in January. The Biden administration extended the payment break and the interest suspension until Jan.31, 2022, calling it a “final” extension of the relief.
- 24% of Parent PLUS respondents say they will need to request additional voluntary forbearance to continue to defer payments after January. Once the payment break and interest suspension is over, any further forbearance could have significant consequences on interest accumulation and funding for borrowers.
- 21% of Parent PLUS respondents regret taking out their loans, and 27% would take out smaller amounts – or not at all – if they could have a trade-in.
- 22% of Parent PLUS respondents expected their child to be able to take charge of their payments, but so far that has not happened, leaving the borrowing parent on the hook.
- 26% of Parent PLUS respondents say they will not be able to retire as planned due to the burden of their loan.
- 28% of Parent PLUS respondents say they rely on their student loan cancellation to help them pay off much of their debt.
“At this point, student loan debt affects families across several stages of life,” said Cecilia Clark of NerdWallet. “We have new high school graduates going into debt, young adults in debt as they try to build their lives, and others near retirement who see their financial lives shattered by this debt. And many of those retirement-age debtors are parents and grandparents who took out loans to help a loved one complete their education. “
Parent PLUS loans are eligible for many of the same student loan forgiveness programs as federal student loans, including borrower’s defense to repayment, total and permanent disability (TPD) discharge, and loan forgiveness. of the public service. But these programs have narrow eligibility criteria, and because Parent PLUS loans have fewer repayment options in general, navigating these programs can be even more difficult for some parent borrowers. Parent PLUS loans can be refinanced through a private loan for a lower interest rate, but this can come with huge risks, including less consumer protections and less flexibility in the face of catastrophic hardship.
According to the survey, many Parent PLUS borrowers are hoping for an eventual forgiveness of their student loan. However, it is not clear whether the Biden administration will prioritize borrowing parents in any new student loan relief initiatives. The administration used executive action to write off nearly $ 10 billion in federal student loans over the past eight months using a “targeted” approach through existing federal student loan cancellation programs. While these measures translate into very real and tangible benefits for many borrowers, they have barely reduced the overall student debt stock. The Biden administration has yet to release any announcements about its ongoing review of legal authorities that could be used as the basis for a broader student loan cancellation.
Biden administration cancels $ 1 billion in student loans but fails rollout, regarding lawyers
Biden to automatically cancel $ 5.8 billion in student loans for more than 300,000 borrowers with disabilities
Biden wants ‘targeted’ student loan cancellation – but what does that mean?
This student loan forgiveness program is in crisis, new findings confirm. Will Biden fix it?