Parents are increasingly struggling to repay federal loans they’ve taken out to help cover their children’s college costs, according to newly released federal data.
The Parent Plus program allows parents to take out essentially uncapped amounts to cover college costs, regardless of the borrower’s income or ability to repay the loan. As the cost of college has risen, the program has become an increasingly critical workaround for families that max out on federal student loans and can’t pay the rest out of pocket.
Education Department officials have long said that they simply don’t have figures on how many of the loans were in default. But the agency has finally run some numbers. The data shows that default rates, while still modest, have nearly tripled over the last four years. About five percent of loans originated in fiscal year 2010 were in default three years later. The default rate at for-profit colleges is much higher, at 13 percent.
Overall, there is about $62 billion in outstanding debt from Parent Plus, according to the new data. The average Parent Plus loan borrower owes about $20,300. The Education Department compiled the numbers at the request of a government committee that is working on new rules for the program.