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Burden of education loans extends past students to parents

By Tamar Lewin
New York Times

When Michele Fitzgerald and her daughter, Jenni, go out for dinner, Jenni pays. When they get haircuts, Jenni pays. When they buy groceries, Jenni pays.

It has been six years since Fitzgerald – broke, unemployed and in default on the $18,000 in loans she took out for Jenni’s college education – became a boomerang mom, moving into her daughter’s townhouse apartment in Hingham, Mass.

Jenni pays the rent.

For Jenni, 35, the student loans and the education they bought have worked out: She has a good job in public relations and is paying down the loans in her name. But for her mother, 60, the parental debt has been disastrous.

“It’s not easy,” Fitzgerald said. “Jenni feels the guilt and I feel the burden.”

There are record numbers of student borrowers in financial distress, according to federal data. But millions of parents who have taken out loans to pay for their children’s college education make up a less visible Generation Debt. For the most part, these parents did well enough through midlife to take on sizable loans, but some have since fallen on tough times because of the recession, health problems, job loss or lives that took a sudden hard turn.

And unlike the angry students who have recently taken to the streets to protest their indebtedness, most of these parents are too ashamed to draw attention to themselves.

“You don’t want your children, much less your neighbors and friends, knowing that even though you’re living in a nice house, and you’ve been able to hold onto your job, your retirement money’s gone, you can’t pay your debts,” said a woman in Connecticut who took out $57,000 in federal loans. Between tough times at work and a divorce, she is now teetering on default.

In the first three months of this year, 2.2 million borrowers of student loans were over 60, a figure that has tripled since 2005, making them the fastest-growing age group for college debt. All told, those borrowers owed $43 billion, up from $8 billion seven years ago, according to the Federal Reserve Bank of New York.

Almost 10 percent of the borrowers over 60 were at least 90 days delinquent on their payments during the first quarter of 2012, compared with 6 percent in 2005. And more and more of those with unpaid federal student debt are losing a portion of their Social Security benefits to the government – nearly 119,000 through September, compared with 60,000 for all of 2007 and 23,996 in 2001, according to the Treasury Department’s Financial Management Service.

The federal government does not track how many of these older borrowers were taking out loans for their own education rather than for that of their children. But financial analysts say that loans for children are the likely source of almost all the debt. Even adjusted for inflation, so-called Parent PLUS loans – one piece of the pie for parents of all ages – have more than doubled to $10.4 billion since 2000. Colleges often encourage parents to get Parent PLUS loans, to make it possible for their children to enroll. But many borrow more than they can afford to pay back – and discover, too late, that the flexibility of income-based repayment is available only to student borrowers.

The consequences of such debt can be dire because borrowers over 60 have less time – and fewer opportunities – than younger borrowers to get their financial lives back on track.

Fitzgerald said she had little hope of a comfortable old age. She has no health insurance. She knows that the odds of finding a good job in her 60s, with no college degree, are slim – and she knows that the government will take part of her Social Security in payment of her debt, which she said had now ballooned to about $40,000 because of penalties for nonpayment. At one point, she said, the Internal Revenue Service seized a $2.43 tax refund.

Jenni has volunteered to take on her mother’s debt, but Fitzgerald has refused, saying it is her obligation, both legally and morally.

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