Parents Snared in $100 Billion College Debt Trap Risk Retirement [View all]

[stockholmer]

http://www.bloomberg.com/news/2012-02-02/parents-snared-in-100-billion-u-s-college-debt-trap-risking-retirement.html

Terry Williams borrowed about $7,000 to earn a degree from Spelman College 38 years ago. For her youngest child, a sophomore at Belmont University in Nashville, she will take on almost $40,000 in parental loans. Williams, a 59-year-old widow who runs a nonprofit that helps black families navigate private-school admissions, is watching her retirement savings dwindle as she pays college bills for her three children, Bloomberg Businessweek reports in its Feb. 6 issue.

“I’ll probably work until I fall dead at my keyboard,” the Decatur, Georgia, resident said in an interview.

It’s not just graduates who are staggering under the weight of educational loans. Parents, too, are borrowing record amounts to put their kids through college, jeopardizing their retirements. With the housing crisis, many families can no longer avail themselves of one popular option for financing university studies: taking out a second mortgage. “A plunge in home prices has erased the equity that many homeowners had just a few years ago,” said Greg McBride, a senior financial analyst at Bankrate.com in North Palm Beach, Florida.

Federally backed educational loans to parents, at an estimated $100 billion, make up 10 percent of the $1 trillion in educational loans, according to data analyzed by Mark Kantrowitz, publisher of the website FinAid.org. The problem is more acute at some private schools, such as Colgate University, Trinity College and Sarah Lawrence College, which have smaller endowments and can’t offer the same financial aid as Harvard and Princeton universities.

‘Robbing Their Future’ .............

snip

--------------------------------------------------------------------------------

What a broken system. It is so similar to the health care train wreck in the US. The more money that the US government throws towards loans and backstops to help pay for tution, the higher the tuition rates go, as the schools (especially the public ones, shame!) greedily raise the price to meet the new inflows of money. If college education costs were included in the inflation rate, who knows how high it would be.