Can parents get hurt by taking out student loans for their child’s education?

Feb 01, 2017
Student loans

By Ross Krieger

If you are a student whose parent will be taking out money for your college education, or you yourself are taking out loans at a later age, be careful. People over 60 are the most rapidly growing segment of borrowers for student loans, and they are facing problems as their debt repayment often affects their retirement saving.

The Boston Globe recently published an article featuring two women in their 60’s who are heavily in debt without a clear way out. One of the two took out loans to return to school in the 1990’s for advanced degrees while the other has a more common story; she took out loans so that her son could attend college. 70% of borrowers over 60 years old are in this situation: borrowing so that a relative can pay for school. Whether for themselves or a relative, borrowing later in life entails risks that can be more detrimental to retirement goals and no one wants to be in debt when going into retirement.

Younger students typically take out loans while their earning potential has room to grow, but for older borrowers, there is a greater likelihood that incomes will decrease, making repayment more difficult. With decreasing incomes, debt payments may have to come out of retirement savings, lowering quality of life in those retirement years. Additionally, these older borrowers have a greater potential for higher medical expenses, which further affect their ability to repay. If these borrowers were to default on the loans, it could put their social security at risk as the federal government has been taking a portion of these payments to recoup losses from defaulted student loans which happened to approximately 114,000 borrowers in 2015.

Situations such as these are alarming because, if not controlled, these loans continue to grow. One woman mentioned in the article received a loan in the 90’s to get a master’s degree, but her career did not pay a high salary. Unable to pay her entire loan off, her balance is now more than five times as much as she originally received. Tuitions are rising and student loan borrowing shows no signs of stopping; therefore, it is important to find alternatives that will help to slow the potential growth of these debts. This could be in the form of payment term limits which would eliminate the possibility such as the one above where a borrower ends up owing multiple times more than they originally received, or income based repayment plans could be used that would adjust payments if the borrower was making a different salary than originally thought.

As student loan debt rises, it continues to affect a greater number of people across the country and can be a significant burden for those without the means to repay. Considering alternatives to traditional student loans can help prevent situations such as those mentioned above.


Source: This is the fastest-growing segment of borrowers burdened by student loans, by Deirdre Fernandes, Boston Globe, Jan 22, 2017.

About the Author

Ross Krieger

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