It’s not only college graduates that are struggling with outsized student loan debt, their parents are also feeling the financial pain.
At a time when student loan debt is garnering a lot of attention, after all collectively the nation owes $1.3 trillion, a new study by the University of South Carolina reveals that parents are increasingly taking out loans to bankroll their children’s college educations. According to the study, which looked at data from greater than 6,500 middle aged individuals from 2004 to 2012, 12.7% of parents (or one in eight) admitted to taking out student debt for their kids. What’s more, they owe $21,000 on average. The study meshes with other research that shows middle aged and older people owe around $400 billion in student debt with 25% used to pay for a child’s college degree.
“Student debt isn’t just a concern for students, but it is also a concern for parents,” said Katrina Walsemann, an associate professor at the University of South Carolina and the co-author of the report. “Though some parents may not be adversely affected by taking on student debt at midlife, other parents may be making trade-offs between saving for retirement and paying for their children’s college through student loans.”
One of the byproducts of the rising costs of college involves parents putting off saving for retirement. That may seem like a smart move, but college can be funded by loans, scholarships, and financial aid while a retirement can’t. Last year, the Center for Retirement Research at Boston College issued research highlighting the fact that many parents are putting off saving for retirement so they can pay for college expenses. It turns out the impact on retirement savings is the same as an unexpected healthcare cost or if the social security retirement age was raised, the Center for Retirement Research at Boston College concluded. The University of South Carolina researchers also found in their study that black parents and those with more education, more income, and higher net worth were more likely to take on student loans than white parents and those without a degree, have low income, and no net worth. In short, high income parents had more student loan debt than their low-income counterparts.
Author: Andrew Rombach
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