It's no secret that student debt can challenge millennials looking to start careers and launch into young adulthood. Increasingly, however, college loans are also making it harder for their parents to wind down their working lives.
Take Harlan Crider, of Elverson, Pa.: He's 79, and he's still putting in about 40 hours a week doing property assessments. He'd rather retire, but he owes $400 a month on loans he took out to help pay for his son's college.
Stories like Crider's are becoming more common as families seek ways to finance school amid rising college costs and federal loan limits that have remained relatively flat for students. The dollar volume of Parent Plus loans — the loan the government offers parents — has doubled in the past decade, according to an analysis of federal student loan data by Mark Kantrowitz, publisher of college scholarship and search site Cappex.com.
Crider stretched out the loan's repayment term to 30 years to make the payments more manageable, but that means the loan term doesn't run out until about 2030.
"I'm going to be paying until I'm dead," he told MarketWatch.
Despite parents' perhaps-understandable instinct to help their children with debt and school, financial advisers suggest caution. They urge students to take on the lion's share: They're the ones who'll reap the benefit of the investment, and they have longer working lives to pay off the loans. Parents, on the other hand, are closer to retirement and likely won't get a financial boon from their kids' degrees.
Rising college costs and federal student loan limits that haven't budged for years, however, have meant some families are turning to parent loans to finance college. When they do, experts say, they shouldn't go in with the expectation that their children will pay off those loans, since the parents' credit is on the line.
Many parents are carrying debts as they approach, and even pass, retirement age. Nearly 2 million borrowers between the ages of 50 and 64 had Parent Plus loans as of 2015, according to the Government Accountability Office. Another 200,000 borrowers over age 65 hold them.
That's up substantially from 2005, when roughly 1 million borrowers between the ages of 50 and 64 had Parent Plus loans and 65,000 borrowers over the age of 65 held them.
Some policy makers have begun signaling awareness of the growing debt burden children's' college costs are placing on their parents as private lenders have begun seeking their business. But we're only beginning to understand what student debt could mean to retirees, according to Katrina Walsemann, a public health professor at the University of South Carolina who has studied the demographics of parents taking on these loans.
Walsemann's research found that parent loans likely have the biggest effect on middle-class parents: They are more likely to borrow than those with negative net worth, they may feel comfortable borrowing because they have some equity on their homes or other assets, she found, and they were the only group more likely to borrow than those with negative net worth.
But middle-class parents may not be as secure in their ability to pay for college outright or manage the debt if money gets tight or the value of their house fluctuates, said Walsemann.
Unfortunately for parent borrowers, Plus loans offer less flexibility during repayment than the ones the federal loans the government gives students. They also come with a higher interest rate.
Crider said his payments have barely covered the interest on the $30,000 loan he took out for his son in 2002. "We've had these historically low interest rates," he said. "You're not allowed to renegotiate this rate."
Kantrowitz suggests that parents considering whether to take on debt to fund a child's college—and who plan to work for 10 more years — use a rule of thumb: Don't take on more total debt, for all of their children, than their annual income, which will mean they should be roughly paid off by the time they retire. (That should be adjusted if they plan to retire sooner, so if they plan to retire in five years they should cut that amount in half.)
Once a family beings repayment, they have some options, said Judith Ward, a CFP and senior financial planner at T. Rowe Price. Some parents may want to prioritize paying down the debt as quickly as possible over retirement saving, but they should only do that if that's possible with a break in retirement saving of two years or less.
Parents who want to pay off the loans more slowly should still be socking money away said Ward, who recommends that workers put about 15% of their paycheck toward retirement savings—and, at a minimum, make sure they're taking a full advantage of any 401(k) contributions their employers offer.
Parents struggling to pay off loans and save for retirement also have options: They can stretch out the repayment term through a plan called extended repayment, which makes monthly payments smaller over the course of the loan. Or they can use a graduated repayment plan, where payments start small and gradually increase, or income-contingent repayment, which caps payments at a percentage of their income after they consolidate their loan.
A growing number of private companies, meanwhile, will refinance Parent Plus loans, though private lenders don't offer as many protections as the government, which can include discharge in the event of a death or a disability. (PLUS Loans, like student loans, also generally cannot be discharged in bankruptcy.)
Linda Vandeventer decided it was worth it to use a private company to refinance the Parent Plus loans she took on so her sons could attend college and pilot school. The deal cut her interest rate in half and shortened the amount of time she'll spend paying off the loans.
Still, she forks over about $2,000 a month, a sum that's caused her to manage her expenses more carefully.
Vandeventer, 51, of Naperville, Ill., said she hopes she can keep up with her 15-year repayment plan so the debt is paid off when she's ready to retire from her human resources job. She's saving enough to get her company's 401(k) match, but it isn't as much as she'd like, and every time she makes a payment she crosses off the month on a calendar she keeps on her wall.
She's knocked off about a year's worth of payments, but she wishes she could knock them off faster. The debt, she says, "puts a huge financial stress on me," she said.