Reid Clark, 57, has unexpectedly become sole breadwinner for her five children.
He took out parent PLUS loans to fund his education and told Insider that he is now $550,000 in debt.
“I’m looking at paying $3,000 a month for most of the rest of my life,” he told Insider.
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Reid Clark he did not expect to support five children on his income alone.
Clark was preparing to pay for his five children’s education as part of a two-income family, but he and his wife divorced in 2011. It wasn’t until a few years later, when the children started going to college, that he decided to turn to federal loans. to fund their own education. Due to particular circumstances, his ex-wife is not contributing.
Now her debt load is over $550,000.
“I’m looking at paying $3,000 a month for most of the rest of my life,” Clark, 57, tells Insider. He estimates that he will have to keep making these payments for at least another three decades.
Parent PLUS loans, the type of loan Clark is paying off, are federal loans that allow parents to pay for their children’s education. They can cover the full cost of attendance minus any financial support the child has already received.
For Clark, the ability to make these loans meant he didn’t have to put off his children’s education despite the unexpected change in his financial situation. But now, he said, although he earns a decent salary from health insurance sales, his retirement is likely to be delayed because he chose to go into debt to prioritize his children’s future.
“For those of us who want to see our children do better, we understand that you improve yourself and increase your chances of success with education,” said Clark. “And I’m just not going to take the risk of not sending my kids to school, even if it creates a tremendous financial burden. It’s not an option.”
Clark says he wanted the best for his children, and Parent Loans PLUS allowed him that opportunity. But he is “very concerned” about his own financial future and blames high interest rates and lending practices that do not take into account the borrower’s income or change in income.
‘They really make it challenging to educate your kids and pay for it’
Parent PLUS loans are the most expensive type of federal loan: they now carry an interest rate of 6.28% for the 2021-22 school year, compared to 3.73% for undergraduate loans, allowing debt to be accumulate more quickly for parents who need help sending their children to school.
New data released last week by the Texas Public Policy Foundation highlighted the burden that student debt imposes on parents, finding that there are about one parent MORE borrowers for every five student loan borrowers. Andrew Gillen, author of the report, told Yahoo Finance that one of the problems with PLUS parent loans is that because the amount parents receive is based on the cost of care rather than how much parents can actually afford to pay, it can create a “dangerous mindset” which leads to increased debt.
It’s not like Clark’s kids attend the most expensive schools in the country. Three of them went to small schools in Pennsylvania, where Clark lives, and the other two went to other state schools on the East Coast. But even for public universities, tuition costs have been rising for years.
Since 2001, the average monthly fee in the state has increased by 211%. In addition to Clark’s loans, each of his children took about $20,000 in student loans because Clark wanted them to have a “vested interest” in their education.
He said his debt boils down to flaws in the federal student aid system, in which the government makes it very easy for people to borrow money but very difficult to repay.
“Early in the whole process is where the problems start,” Clark said, referring to the unverified amount parents can borrow years in advance. “They really make it challenging to educate your kids and pay for it.”
President Joe Biden’s proposal to write off up to $20,000 in student debt for federal borrowers is currently awaiting a Supreme Court ruling after two lawsuits stalled its implementation. If it fails and payments resume, Clark envisions having the wherewithal to make monthly payments on his loans, but completely eliminating his debt could take decades, and he said he has “no hope” of student loan forgiveness anytime soon.
“I’m very concerned about my ability to pay off loans during my remaining working years, and that’s going to scare me even more years from now when I retire and have very limited income,” Clark said. “That’s the part that gives me the most anxiety.”
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This story was originally published in September 2021.
Read the original article on Business Insider