New college loans target parents…


Have you seen the latest college loan expose from the Wall Street Journal?

It starts....

"Squeeze the Parents: New Student Loan Goes Straight to Mom and Dad. As the cost of college climbs, private student lenders are rolling out loans targeted to parents.

As rising tuition costs pile ever-higher debts on students, lenders and colleges are pushing for an alternative: Heap more on their parents.

An increasing number of private lenders are rolling out parent loans, which allow borrowers to get funds to pay for their children's education without putting the students on the hook."

Isn't this just so noble of these lenders. Sacrifice the parents to give the kids an education. Gold star for these companies. I KID!

I can't help but cringe at the parents in the article who are taking on $40k per year in parent loans (with a 10-year payback). All so they can send their child to Stanford.

This isn't going to end well for them, the monthly payments alone are going to be $2k per month in just a few years. Ouch!

That's going to be brutal on their cash-flow, lifestyle, and possibly ruin their retirement. Somebody needs to track down this family and tell them there's a better way. The SET for Life Solution™ way. This is what we specialize in here at College Planning & Funding Strategies.

Let's really take a look at this...

bank of parentsLenders see the new product as an area of growth in an otherwise sluggish lending environment. Colleges are helping push them in part because of a quirk in federal calculations. Unlike ordinary student loans, the parent loans don't count on a scorecard in which the US Education Department discloses universities' median student debt at graduation. That can ease the pressure to keep tuition increases in check at a time when heavy student debt has become a political issue.

Education loans in general, whether for students or parents, are spreading out the costs over time; they are NOT cutting college costs.

The average annual cost of a four-year, private college, including room and board, has climbed 53% in the past 10 years, to $43,921, according to the College Board. At public, four-year schools, it is up 61%, to $19,548 for in-state students.

Total student and parent college debt rose to $1.23 trillion at the end of 2015, more than double the level eight years earlier, according to the Federal Reserve Bank of New York. Despite parents' contributions, however, large numbers of students are emerging from college with debt loads that critics call unsustainable.

So, what is a family to do? When it comes to saving and paying for college, College Planning & Funding Strategies can help make a college education an affordable reality.

 

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