There’s no doubt many parents are helping shoulder the financial burdens of their young adult children in the recession. We posted in 2009 and 2010 about recent college grads moving home because they couldn’t afford to live on their own.
But what happens when parents must take on the debts of their young adult children? We started thinking about that after hearing from Vicki Brady.
She and her husband took over the student loan payments of their 24 year old son as he struggled to stay current on more than $100,000 in school debt.
He landed a job after college but it doesn’t pay enough for basic living expenses and the loans.
Brady and her husband stepped in to help. To afford it, however, they’ve had to stop contributing to their retirement accounts.
The Cloquet woman says the new obligation may also make it nearly impossible for them to cosign college loans for their daughter in a couple years.
Brady, part of MPR’s Public Insight Network, says her son worked all through college to pay his bills, “so he’s not a slacker, just overwhelmed.” He’s moving up in his company but “there is no way he will make enough money any time soon to take over the payment on his student loan.”
Student loan debt has risen dramatically here and across the country.
Last week, the New York Times reported, “Student loan debt outpaced credit card debt for the first time last year and is likely to top a trillion dollars this year as more students go to college and a growing share borrow money to do so.”
In Minnesota, student borrowing grew faster than tuition or inflation over the past decade, state Office of Higher Education data show.
Among students graduating from Minnesota public universities, 77 percent had student loans, the average amount borrowed was $22,000, and the monthly payment on a 10-year payment schedule was $253, the OHE says.
Defaults are low on student loans, probably because the consequences are so scary. It can kill your credit rating You also become ineligible for more federal student aid if you ever want to go back to school, the U.S. Department of Education notes.
While most of the focus has been the burden on the student, Brady’s story reminds us the cascading effects of this kind of debt.
According to the Times, it’s become a kind of anti-dowry, forcing young people to wait longer to buy a house, get married and have children.
But it’s also reaching into family finances, triggering longer term problems.
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