MIAMI (CBS4) — A newly released study shows a record number of households, one in five, now face college debt.
On top of that, more middle aged Americans than ever are struggling with college loans, though it may not stem from their own education.
This painful increase in college expenses is often felt the most by the parents supporting their students.
With two kids in college at the same time, Miami dad Jose Paz has found his family budget is stretched pretty thin.
Even though his daughter Evette has a scholarship, there are all those extra costs.
“It’s hard because everything costs a lot, like books, activity fees. Yes it’s hard, we do a lot of things to cover it,” explained Paz.
Evette’s a senior at FIU who appreciates all the sacrifices her family is making to send two kids to college at the same time.
“It’s difficult for them but it means a lot to my brother and me to be able to go to college,” said Evette. “We’re the first ones in the family to do it.”
They’re not alone.
Jean Andes and Mark Hilliard had the best of intentions when it came to saving for their kids’ college but adds, “It’s hard to save when you’re paying the mortgage and your utilities.”
Her kids had to take out college loans and now face $120,000 in debt.
Dad Mark added it all up and found “It cost us about as much to borrow to put our two children through college as it did to buy our house.”
Mark Kantrowitz of Finaid.org said “It’s typically not just debt for undergraduate degrees, instead, it’s like parent plus loans, from their graduate education and from cosigning on private student loans.”
So called “parent-plus” education loans have doubled in the last decade, with an average balance of $34,000 with more parents than ever are borrowing for their children’s’ educations.
“Before the credit crisis about half of all student loans required cosigners. In the aftermath of the credit crisis and today more than 90% of new private student loans,” said Kantrowitz.
Jean and Mark cosigned for their kids.
They hope to have everything paid off in seven to ten years.
Kantrowitz stressed parents shouldn’t cosign for or take out loans that will take longer than ten years to pay off and warned “If they’re borrowing more than that it’s going to eat into their retirement.”
Financial planners warn parents and students should only borrow what they really need because there’s a tendency to borrow to the loan limit which is not always necessary.
America Saves, an initiative of the Consumer Federation of America, and Sallie Mae just released a tip sheet to provide recent graduates with information and tips on how to pay their student loans.
- Know how much you owe each month.Keep track of what you spend for one month and create a budget that includes your student loan payment. You may find that you will need to cut out unnecessary items in order to pay down your debt or that you can pay a little extra each month to pay down your debt even faster. Contact your student loan servicer or visit their website to calculate different payment scenarios that best fit your budget and personal situation. Proactively planning payments helps save you time and money.
- Make payments automatic. Signing up for automatic debit is an easy option that electronically deducts payments from your checking or savings accounts, saving you time, stamps and, most importantly, providing you with peace of mind that you have made your loan repayment on time. Bonus: many servicers may even provide you with a lower interest rate just for signing up.
- Make payments each and every month. Resist the option of putting off your payments, as deferment or forbearance typically mean you’ll pay more over the life of the loan. It’s empowering to tackle your payments now.
- If you do fall behind, get help. Call your loan servicer to discuss your options – or if they are calling you, answer the phone. A different payment plan or a temporary postponement of payments may give you the extra time you need. If you need help organizing your finances, a licensed nonprofit consumer credit counseling service can offer free budget counseling.
- Update your servicer with any changes. If your situation changes, your student loan servicer needs to know about it. Keep your loan servicer updated with any change in mailing address, email and phone numbers. Accurate personal details will help ensure you receive all the information you need about your payment due dates, helping you stay on track no matter what the change in your situation.
- Beware of scams! Some fraudulent companies might claim to offer you easy ways to erase or lower your loan payments. If you have any doubt about services being offered, get in touch with your student loan provider.
- Build an emergency fund in case of unpredictable circumstances. Aim to save $500 to $1,000 to meet unexpected financial challenges like paying a parking ticket, repairing the brakes on your car or covering dental expenses. Saving even small amounts each month can add up and give you the peace of mind to know you can weather financial emergencies while continuing to pay down your student loan.
- To download the tip sheet, go to http://www.americasaves.org/media/studentloantipsheet.pdf.
- For more tips on planning for college or student loan repayment, please visit CollegeAnswer.com.
- For more tips, advice and resources on how to save money and build personal wealth visit AmericaSaves.org