Patricia Rizzo, 62, owes the federal government more than $ 126,000. But what started out as an investment in her daughter’s future affects her own prospects.
As a single mother, she makes around $ 40,000 a year and works in a drug rehabilitation clinic in New Jersey. She hopes to get a drug counseling certification soon, which could raise her salary, but admits she’s still a long way from zero.
“What I’m looking at right now is pay it over 20 years, which is going to make me 82,” said Rizzo.
She joins a growing list of parents over 60 who are postponing their retirement due to Parent PLUS Loans, a program that began in the early 1980s to help parents fund their children’s college education. A recent NerdWallet survey found that up to 26 percent of parents or guardians using Parent PLUS, also known as Direct PLUS, are not paying back loan debts as originally planned.
Rizzo said she took out seven Parent PLUS loans to pay for her daughter’s eight semesters at Skidmore College in New York.
She said it was so important to provide her daughter with quality education that she moved to the affluent town of Ridgewood, New Jersey so Emily, now 26, could attend high-level public schools. Rizzo encouraged her daughter to go to the best college she could, regardless of the cost.
“I felt like going to college, I didn’t want my kids to miss out,” said Rizzo, who also has a son, adding that she was attending workshops at her daughter’s high school to learn about college opportunities. Inform financial aid.
What began as a loan plan for middle-income families has grown into a wide-ranging program with few caveats, said Rachel Fishman, assistant director of educational research at New America, a Washington think tank.
“You can see that parents easily take out tens of thousands of dollars in these loans each year,” she said. “And then at the end of their careers they can easily accumulate over $ 100,000.”
Fishman said she is seeing more low and middle income families stepping over their heads.
“The difference is that this is not a jointly signed loan,” she said. “This is a loan that a parent takes out on their own behalf; the student is not required to repay this loan. “
To qualify for a Parent PLUS loan, borrowers must undergo a credit check, but there is essentially no limit on the loan amount and a parent or guardian can pay as much as the total cost of participation.
“Just because one parent is given the loan doesn’t mean the federal government thinks the parents can actually repay the loan,” Fishman said. “All they did is see if the parent has a negative credit history or not.”
Interest rates on Parent PLUS loans are based on the year they were taken out, but many families borrow more than they can afford, she said.
From 2005 to 2015, the average student loan debt for borrowers aged 60 and over doubled, according to the Consumer Financial Protection Bureau. Most of the debts are for their children or grandchildren.
In Rizzo’s case, the interest on her seven loans fluctuated between 6 and 7 percent. She has made no payments because of the rising cost of living, other debts, and the pandemic. She said she intended to pay but hoped some relief would come.
After several extensions, the Biden administration paused payments for student loans until May 1, which meant that interest rates were partially frozen at zero.
In the past, efforts to reduce Parent PLUS loan eligibility levels have been quickly rolled back.
Some critics and experts say that getting rid of the program specifically, or student debts in general, would cost the government billions or even trillions of dollars. An attempt by the Obama administration to reduce the number of eligible Parent PLUS borrowers sparked a backlash from historically black colleges and universities, who claimed it affected enrollment. The move led to threats of legal action and a lot of criticism.
The impact of Parent PLUS loans on borrowers of all backgrounds is difficult to quantify, according to experts, but the reality is that many parents and guardians have a lot of debt. While officials debate whether to either partially or fully cancel the student debt, a loan can end without repayment in a number of ways.
These include a layoff, usually when a borrower dies, is permanently disabled, or closes the school where the loans were taken; and forgiveness or dismissal, typically associated with government jobs or teacher loan programs.
With student loan cancellation still in the air, Fishman encourages those in debt to prepare, plan, and seek help, including examining the possibility of a loan consolidation.
“Always be very careful when it comes to refinancing a federal loan,” she said. “A student is unable to refinance a Parent PLUS loan into a state consolidation loan, so they must turn to the private market for this type of consolidation.”
Rizzo said her daughter, a 2018 graduate who is now a reporter, is eager to pay off the loans, but the mother isn’t too worried about it.
“I can’t say I regret it because my daughter has achieved so much at the moment,” she said. “I mean, she just got the best education.”