The Parent Trap

THE DEBATE OVER HOW TO RESOLVE THE nation’s student debt crisis is heating up again, as pressure builds on President Joe Biden to extend the pandemic pause on repayments due to expire in September and progressives renew calls to forgive some of the $1.6 trillion that Americans owe. Advocates speak eloquently about the strain college debt puts on young people starting out in life: They can’t pay their bills, get married, buy a home, start a family or, often, move out of their parents’ basements. Typically left out of the discussion: those parents, many of whom are weighed down by college loans of their own—struggling to pay their bills or save for the future, forced to postpone retirement or wonder if they’ll ever be able to retire at all.

One out of every four federal dollars lent for undergraduate education last year went to parents and a stunning 22 percent of that $1.6 trillion in outstanding student debt, $336 billion in all, is held by people 50 and older, who typically borrowed to help pay for a child or grandchild’s higher education. Those numbers reflect an explosion in borrowing in recent years fueled by soaring tuition rates, a change in rules that made it easier for parents to get loans and, in some cases, aggressive marketing tactics by schools that prompted more parents to borrow, in larger amounts. Over the past decade, a time when lending to undergraduates has actually been falling, parent borrowing under the federal PLUS loan program has increased 16 percent; over the past three decades, it’s shot up more than 750 percent, the College Board reports.

Now, a new Newsweek analysis of parent-loan data released by the federal government for the first time this year shows how quickly many of these parents run into serious problems repaying what they owe, how deeply in the hole they are, which schools have the most serious problems and how much of a strain parents’ college debt puts on the households that can least afford them.

According to the data, which covers nearly 1,000 colleges and universities that participated in the federal Parent PLUS loan program from 2017 to 2019, nearly one in 10 parents default or are seriously late with payments within just two years of borrowing. That’s far faster than the typical student borrower who takes three years to hit a comparable rate. The parent default and delinquency rate hit 20 percent or more at over 150 schools and at least 30 to 40 percent at dozens of institutions—a rate high enough for an institution to lose federal funding if the loans had been made to undergraduates instead of parents.

The majority of these PLUS borrowers are from low-income households—nearly six in 10 in the database are eligible for Pell grants,