Education Borrowing

SINCE 2008’S THIRD quarter, student loans outstanding have soared 162%, even as overall household debt has increased just 33%, according to figures from the Federal Reserve Bank of New York. Research suggests that, among those who struggle to repay student loans, many had borrowed to attend a community or for-profit college, or failed to graduate.

The jump in education borrowing has been driven partly by rising college costs and partly by declining financial help from parents. Can’t afford to help your children with college costs? Consider counseling them to avoid costly colleges that will leave them heavily in debt, especially if their planned career will pay a modest income.

You might also suggest strategies that can hold down college costs, such as attending a community college for the first two years and then transferring to a more prestigious school, from which they would then graduate. Alternatively, you might suggest attending a nearby college and saving money by living at home initially. Room and board are a major college cost, accounting for an average 53% of total costs for in-state students at public universities, according to College Board figures for the 2022-23 academic year.

While education loans are available from some banks, students should probably focus on federal loans. Some 90% of student loans are made by the federal government. Parents might also consider the federal loan program for parents, as well as a home equity line of credit and possibly a 401(k) loan.

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