One of the hazards of dragging out your student loans is you might end up with your loans PLUS your kid’s loans. Double trouble.
I read an interesting article this week titled Student Loan Vicious Cycle: Parents Pay Their Own Debt and Kid’s Too. I want to share a few selected quotes from the article and my input.
“Some parents who took out student loans for their own education are still repaying them after 20 or more years and now have incurred additional significant student debt for their children to attend college.
While there is no available data on parents who have accumulated debt for both themselves and their children, parents are now borrowing larger amounts for their children to attend college, said Shelly Repp, President of the National Council of Higher Education Loan Resources.”
… Some parents are still repaying their own education loans, because they had consolidated the loans or enrolled in an income-based payment program.
… Many people elect to defer making payments on their student loans for a long as their lender will allow, said Jeremiah Heck, an Ohio consumer debt attorney.
“During that time, even with relatively low interest rates, the balances have compounded to a point that becomes far beyond what was borrowed for their education,” Heck said. “No parent wants to tell their child they can’t afford to help them with tuition loans, but in many cases it would be a better choice. The Baby Boomer generation will forego paying down loans and saving for their retirement because of their sense of obligation to their children. Ultimately down the road, everything has to get paid. The answer is most always: stop borrowing, stop deferring and start paying more.”
One reason to get your student loans paid off as quickly as possible is it puts you in a better position to help your children pay for college. The longer you have your own student loans, the longer before you can start saving money for their college fund. The weaker you are financially (with a bunch of debt) the more likely they are to end up with student loans and perpetuate the nasty student debt cycle.
And maybe the worst outcome of all is that you end up with your own student loans PLUS loans for your children. That only creates weakness and lack of freedom as you age.
Sacrifice might suck in the short term (to pay your loans off quickly). But I doubt it sucks more than being broke and deep in debt as you reach what otherwise could be the prime of your life.
Dumping student loans is wise. Piling student loans on top of student loans isn’t.
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