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Parents: Don't Sacrifice Yourselves On The Altar Of Your Children's Education

posted on Wednesday, May 31, 2017 in What We're Reading

Parents have sacrificed their financial futures on the altar of their children’s education. Fueled by easy federal money and self-interested colleges, the result is a student loan crisis that appears already to be eclipsing the catastrophic proportions of mortgage indebtedness leading up to the financial collapse of 2008.

Please allow me to disclaim a few things:  

  • I’m not anti-education. In fact, I valued my college education so much that I went back to teach at my alma mater, Towson University, for seven years.
  • I believe that a college education is a) inherently valuable, b) an enhancer of career prospects and c) fertile ground for unforgettable life experiences beyond the classroom.  
  • I’m a parent. I’ve encouraged my two sons, 13 and 11, to strive for a college education, and I’ve also offered to share in the financial burden.
  • I’m not a prognosticator. Therefore, I’m not predicting an imminent crisis akin to the Great Recession, led by student loan defaults. Crystal balls don’t work, and anyone who claims to have one is selling something.

I’m also not a conspiracy theorist, but the facts, according to a new Wall Street Journal article, are indisputable:

  • Overall student debt—with over 42 million loans outstanding—is north of $1.3 trillion.
  • Roughly 40% of borrowers had credit scores below the subprime threshold of 620. Subprime mortgages peaked at nearly 20% of mortgage originations in 2006.
  • The vast majority of the loans were originated by the federal government and cannot be eliminated, even in bankruptcy.
  • As of September 2015, 11% of borrowers had gone at least a year without making a payment on a Parent Plus loan. That exceeds the default rate on U.S. mortgages at the peak of the housing crisis.
  • A new generation of retirees is now having to reduce their tax refunds and Social Security benefits in order to pay delinquent loans.

Parent Plus loans, by the way, are those that parents take out to cover tuition and living expenses typically after kids have maxed out their student debt allowance, ensuring that both the apple and the tree are sufficiently indebted.  

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