Whoever coined the idea that parents must sacrifice their own futures for their child’s future could have been foreseeing just how expensive it is to send a kid to college. It may be a noble cause to pay for your child’s university education, but that college degree often comes at the expense of a parent’s financial well-being.
An August 2022 survey from U.S. News & World Report finds that parents who borrow student loans for their children often delay their own financial goals to help cover college expenses. Nearly half (about 48%) of parent borrowers took out more than one student loan to fund their child’s college education, and many respondents have been repaying their debt for a decade or longer.
The data also explores borrowing trends among parents, such as what type of loans they borrowed, the loan balances they carry and their hopes for student loan forgiveness.
- Choosing the right loan: Parents borrow a mix of federal and private student loans to help their kids pay for college. More borrowers used only federal Parent PLUS Loans (43%) versus only private parent loans (30%), but more than a quarter (28%) borrowed both federal and private loans.
- Banking on forgiveness: The vast majority (79%) of parent student loan borrowers plan to use forgiveness programs. Among them, income-driven repayment plans (45%) and Public Service Loan Forgiveness (31%) are the most popular choices.
- Making sacrifices: Three in four parent borrowers put their own financial goals on hold to take out student loans for their children. Respondents report delaying retirement, buying or selling a home, and changing jobs due to their parent student loan debt. What’s more, 43% regret taking out parent student loans.
- Bridging the gap: In addition to parent student loans, 43% of respondents had to borrow additional money to pay for their child’s college. Of those who did, 59% used a personal loan, 36% borrowed from their 401(k) retirement fund and 21% tapped into their home equity with a loan or line of credit. Plus, 34% took out credit card debt.
- Progress report: Most parent borrowers (81%) initially borrowed their student loans between 2011 and the present, while just a fifth of them currently have loans that were originated in 2010 or before. Respondents have had measured success in paying down these loans: While 73% originally borrowed $10,000 or more, just 54% owe that much today.
Parent Borrowers Prefer Federal Loans, but Private Loans Are Popular, Too
When borrowing student loans on behalf of a child, parents are faced with a choice: borrowing Direct PLUS Loans from the federal government or going through a private lender. Each option has its own benefits and drawbacks, and the right choice will depend on an applicant’s creditworthiness and the loan’s repayment terms, among other considerations.
Our survey found that parent borrowers chose federal Parent PLUS Loans at a higher rate than private parent loans. Of parents who have borrowed on behalf of their children, 43% used only federal Parent PLUS Loans, while 30% used only private student loans. More than a quarter (28%) of respondents borrowed a mix of both federal and private parent student loans.
Though parents marginally prefer federal Parent PLUS Loans, they actually borrow private student loans at a comparatively high rate. The majority (58%) of parent borrowers surveyed either used only private loans or used them in addition to federal loans. On the other hand, only 5% of undergraduates took out private loans for the 2015-16 academic year, according to The Institute for College Access & Success.
4 in 5 Parent Student Loan Borrowers Are Counting on Forgiveness
Some parents may choose Direct PLUS Loans over private loans because of the enhanced federal protections, including access to certain student loan forgiveness programs. Meanwhile, private parent loans typically aren’t eligible for federal debt forgiveness.
The vast majority (79%) of parent borrowers plan to use student loan forgiveness programs. The most popular choices were federal programs like income-driven repayment plans (45%) and Public Service Loan Forgiveness (31%).
This may come as a rude awakening for the 11% of parents surveyed hoping to use “another type” of student loan forgiveness. Besides the federal programs offered by the Department of Education, many of which have strict eligibility requirements and limiting prerequisites, there are very few options for having student loan debt discharged – besides perhaps filing for bankruptcy.
For Many Parent Borrowers, Student Loans Came Up Short
The surging price tag of a university education sometimes leaves families searching for alternative ways to pay for college expenses. In addition to parent student loans, 43% of respondents borrowed additional money to pay for their child’s college.
Of the parents who borrowed additional funding to pay for a child’s college, most (59%) chose personal loans. Since these loans typically don’t require collateral, they can offer fast, unsecured funding – but usually at a higher interest rate than traditional student loans. Similarly, about a third (34%) of parents took on high-interest credit card debt to help their children pay for college.
Of further concern, 36% of parents borrowed from their 401(k) retirement account to help pay for college expenses. While a 401(k) loan can be a low-cost borrowing strategy since you’re paying yourself back plus interest, it can also eat into your retirement nest egg. And as you’ll see below, that experience is shared by many of the parents we surveyed.
Parents Often Sacrifice Their Own Financial Wellness to Send Kids to College
A university degree can help set your child up for professional success, but that achievement may come at a steep cost for parents. Three-quarters (75%) of parent student loan borrowers have had to delay financial milestones due to their debt, including retirement (31%), buying or selling a home (30%), and changing jobs (22%).
Perhaps unsurprisingly, 43% of respondents regret taking out parent student loans.
Where Are Parent Student Loan Borrowers Today?
Borrowing parent student loans may seem like an unending long-term commitment, and that’s certainly the case for a sizable minority of borrowers: A fifth have been repaying their loans since 2010 or earlier. Here’s the breakdown of when respondents originated their parent student loans (figures are rounded):
- 2017 to present: 54%.
- 2011-2016: 27%.
- 2005-2010: 12%.
- 2004 or before: 8%.
Still, most parent student loan borrowers have been paying off their debt for less than a decade, and they’ve made steady progress in lowering their loan balances. While 73% borrowed $10,000 or more initially, 54% owe that much currently.
Just 7% of parents borrowed less than $5,000 worth of student loans for their children, but now about a fifth (21%) of parents owe less than $5,000. On the other hand, 16% still owe $20,000 or more – which is still much lower than the 24% of parents who borrowed as much initially.
It’s important to zoom out to see the bigger picture: Parents across the country continue to pay student loans on behalf of their children, often long after graduation. What’s more, a quarter (25%) of parents didn’t initially expect that they would need to borrow money to finance their child’s education. Even if they did anticipate they would borrow student loans, 20% borrowed more than they expected.
When deciding whether to take out debt in your own name to finance your child’s college expenses, it’s important to set realistic expectations. Be sure to weigh your options carefully, and consider consulting a financial advisor if you need more hands-on guidance.