October8, 2012 > posted by Jonathan

[Link] The Parent Loan Trap

Interesting article about the current student loan system and how it burdens both parents and students. They mention needing reform for the loan system, but we think an overhaul of the entire approach to college is necessary.

Today, a dozen years on, Ms. Nemenzo’s debt not only remains, it’s also nearly doubled, with fees and interest, to $33,000. Though Ms. Almendral is repaying the loans herself, her mother continues to pay the price for loans she couldn’t afford: Falling into delinquency on the loans had damaged her credit, making her ineligible to borrow more when it came time for Ms. Almendral’s sister to go to college.

Ms. Nemenzo is not alone. As the cost of college has spiraled ever upward and median family income has fallen, the loan program, called Parent PLUS, has become indispensable for increasing numbers of parents desperate to make their children’s college plans work. Last year the government disbursed $10.6-billion in Parent PLUS loans to just under a million families. Even adjusted for inflation, that’s $6.3-billion more than it disbursed back in 2000, and to nearly twice as many borrowers.


Mr. Kantrowitz believes that the student-loan system is in need of much broader solutions. The current federal loan limits for undergraduates are arbitrary, he says, and not based on the type of program or a student’s estimated future earnings. More grant money could also help alleviate overborrowing, especially for low-income families.

“We need a complete overhaul of the student-loan system so there’s a more rational set of limits” to curb the debt problem, says Mr. Kantrowitz. The government can’t keep “magically sweeping it under the parent rug.”

Read the rest of “The Parent Loan Trap” here.