“Everyone wants to do everything they can for their children; there is a natural tendency to give your kids what they want, ”says Nancy Goodman, founder and executive director of College Money Matters, a nonprofit organization that helps families make academic decisions. “Many parents have also accepted the idea that a college degree is a golden ticket. While yes, historically it has certainly been true, it is not true for all children in all situations and in all grown-ups.
Parents expect help from their children
When comparing interest rates and fees on student loans, it’s better for students to borrow federal undergraduate loans than for parents to take on PLUS debt, says Sandy Baum, non-resident senior researcher for the Center on Education Data and Policy at the Urban Institute and Emeritus Professor of Economics at Skidmore College in Saratoga Springs, New York.
But experts say parents often view loans as the only way their child can afford college, and some parents expect their child to eventually take responsibility for the payments. According to the survey, 22% of Parent PLUS borrowers say they thought their children would take care of their loan repayments, but they haven’t yet.
Legally, parents cannot remit their debt to their child that easily. The only way to do this is to refinance with a private lender and transfer the property to their child, which some lenders allow. But if the child borrows the maximum amount available, Baum says, the idea that he will be able to pay off all that and more upon graduation “seems questionable.”