Poor parents: Federal data show more parents going into more debt to send kids to college

Data source: NCES Digest of Education Statistics Table 331.95.

Data source: NCES Digest of Education Statistics
Table 331.95.

The most recent data on how Americans pay for college show that parents are taking on more of the debt burden for their kids. In 1999 about 13 percent of parents took out PLUS loans. The average loan amount was $19,700 in inflation-adjusted dollars. By 2011, the numbers had increased to 21 percent of parents taking out college loans for their kids, each with a debt of $27,700 in inflation-adjusted dollars. That’s a 60 percent jump in the percentage of parents taking out loans and a 40 percent jump in the loan amount.

“One of the biggest changes we’re seeing is that parents are borrowing a lot more money,” said Susan Aud of the National Center for Education Statistics, speaking on May 18, 2014 about long-term trends in the National Postsecondary Student Aid Study, which tracks how students pay for college.

PLUS loans (Parent Loans for UndergraduateS) are direct loans from the federal government. They don’t include all parent borrowing to pay college bills. Some parents take out home equity loans or go into credit card debt, which this data doesn’t capture. But PLUS loans are probably still a good indicator of parent financing trends because their low fixed interest rates make them very popular.

Some of the increase in PLUS loans may not only be a reflection of changing parenting philosophies and rising college costs (i.e. indulgent parents who don’t want to saddle their children with crazy high college debts) but also a reflection of how much easier it is for parents to navigate the federal student loan system through a single application. The U.S. Department of Education took over the student loan system in 2010. Previously banks and other private sector lenders issued government-guaranteed loans.



POSTED BY Jill Barshay ON May 21, 2014

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M Lewis

It’s not fair to assume that parents are indulgent because they “don’t want to saddle their children with crazy high college debts.” Our generation could squeak through college virtually debt-free. The same is not true for our children. Studies show that students with college debt end up with more lifetime debt than others. It is a loving investment to make sure our children have a fresh start when they get through college just as we did.

Pat Burk

The accumulated debt load of student loans and increased credit, car and housing loans that characterize young college graduates means that the ability to begin to build net worth is significantly postponed. In addition, increased earnings that accrue to college graduates get redirected out of the mainstream economy into loan repayment. Thus, the increasing debt load is having a negative impact on all of us, not just the students and their families. State support for tuition subsidies and increasing financial aid help the students and the economy by increasing college educated individuals with lower debt loads who can channel increased earning potential into the economy.


You might consider writing about those who successfully discharged student loan debt in bankruptcy.

1. Michael Eric HEDLUND v. The Educational Resources Institute Inc. et al., case number 12-35258, in the U.S. Court of Appeals for the Ninth Circuit (May 22, 2013);

2. Roth v. Educational Credit Management Corporation, 490 B.R. 908 (9th Cir. BAP 2013);

3. In re Robert Jacob SCOTT and Sarah Jane Scott, Debtors. Robert Jacob Scott and Sarah Jane Scott, Plaintiffs v. U.S. Department of Education; Educap, Inc., The Education Resources Institute (TERI), et. al, Defendants. Bankruptcy No. 07-14317. Adversary No. 07-01367. United States Bankruptcy Court, W.D. Washington, at Seattle. September 25, 2009;

4. Christian D. MENDOZA, Chapter 7, Debtor. Christian D. Mendoza, Plaintiff, Educational Credit Management Corporation; Hemar Insurance Corporation of America, Defendants. Case No.-01-53238-MM. Adversary No. 01-5283. United States Bankruptcy Court, N.D. California. June 20, 2007;

5. In re Lorna Kaye NYS, Debtor, Educational Credit Management Corporation, Appellant, v. Lorna Kaye Nys, Appellee. No. 04-16007. United States Court of Appeals, Ninth Circuit. Argued and Submitted February 15, 2006. Filed April 26, 2006. 446 F.3d 938; and

6. Krieger v. Educ. Credit Mgmt. Corp., No. 12-3592 (7th Cir. Apr. 10, 2013).

The Hedlund case in 2013 and Scott case in 2009 are significant. These two cases clearly expand the law in favor of student loan debtors who reside in the nine western states. Both Hedlund and Scott were in their 30s, healthy, well educated, had graduate studies from respected universities (not diploma mills or questionable trade schools) and were employed, and they successfully discharged most of their student loan debt in bankruptcy.

This is a trend that the mainstream media has not picked up on.

Also, see the excellent law review article by Jason Iuliano, Ph.D., “An Empirical Assessment of Student Loan Discharges…”, American Bankruptcy Law Journal, September 2012. He makes the case that millions of debtors could successfully discharge their student loan debt if they merely tried.

Finally, the excellent book Bankrupt Your Student Loans and Other Discharge Strategies, 3rd Edition (2009), by Chuck Stewart, Ph.D., publisher Stewart Education Services. This book makes the case that the Department of Education will significantly reduce a debtor’s student loan debt, in an out of court settlement, if the matter is brought to bankruptcy court. Dr. Stewart’s own case can be found at California Central Bankruptcy Court case LA04-19681ER, filed August 2004.
Chuck Stewart, Ph.D.
3722 Bagley Ave. #19
Los Angeles, CA 90034-4113

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