College: The Parent Loan Problem
With all the talk about “Free College” and the college debt tsunami, the focus has been on the students and has left the parents behind. The problem with this focus is that an average family of four with only two children going to college, and only at modest colleges of $30,000 per year, will create more PARENT debt than student debt. Sound funny? Let me explain.
I have been in the college world for over a decade. I have written many articles, published a book ‘Cracking the College Financial Code’, do a weekly radio show “The College Connection” and worked with thousands of families in the past decade. We have been saying for a long time that we do not have a student loan problem in this country, but a Parent Loan problem in this country.
That family of four will cost $120,000, per child, if they graduate in four years, and that is rare. The average is closer to 5 or 5.5 years. The assumption is the student will be in debt for around $100,000 and be burdened for the rest of their lives, right? WRONG- the FAFSA only allows for that student to accumulate $27,000 over four years in their name, leaving mom and dad on the hook for the other $93,000. Multiply this out for two kids and mom and dad will have a combined $186,000 of responsibility to get their children through college, while each of the kids will have $27,000 in their names. So do we have a student loan problem or a Parent loan problem?
Sure, FAFSA will help, with loans. With all of the information on the internet, financial advisors, CPA’s and news coverage, we must be getting good answers. If traditional planning worked, would we have over $1.4 Trillion in combined student and parent loans? Traditional and government suggested programs like 529 plans, UGMA accounts, trying to save enough to pay for college has only added fuel the fire.
Surely the government and the universities see the writing on the wall and will show up to help mom and dad? Maybe they will combine for $20,000 per child in gifting (‘Cracking the College Financial code’ will show you how to increase the gifting), but most will not get more. That is why over 30% of this $1.4 Trillion is in parents’ names and growing.
We created the College Debt Elimination Program to help parents, who are closer to retirement, have a strategy which gives a game plan to take 5-7 years off the time frame of paying on these college loans. Parents are juggling many things like funding their retirement, paying off the mortgage, cars loans, credit card balances, health care payments, and now Parent Loans. We show how to look at this a little differently, combining the balance, monthly payment and of course the interest-the simple interest, compound interest and what I call stacked interest for many loans to cover college cost. We share the inner workings of the Parent Loan and help to strategize getting out of them as quick as possible. This program helps parents get control with a strategy. We do not refinance, negotiate your debt, or enroll you in credit counseling. We show you how the interest, balances, and payments work for you or against you. We run a family economy evaluation and show you what to pay, and when, to keep your family at the center of the discussion instead of the credit card company, the bank, or Sallie MAE. This game plan helps pay off the debt quickly and shows a path to a clean house. This is just common sense and simple math.
If you would like to learn more please contact Stan@client-connections.com
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