Millions of U.S. parents have taken out loans from the government to help their children pay for college. Now a crushing bill is coming due.
Hundreds of thousands have tumbled into delinquency and default. In the process, many have delayed retirement, put off health expenses and lost portions of Social Security checks and tax refunds to their lender, the federal government.
Student loans made through parents come from an Education Department program called Parent Plus, which has loans outstanding to more than three million Americans. The problem is the government asks almost nothing about its borrowers’ incomes, existing debts, savings, credit scores or ability to repay. Then it extends loans that are nearly impossible to extinguish in bankruptcy if borrowers fall on hard times.
…Roughly eight million Americans owing $137 billion are at least 360 days delinquent on federal student loans, nearly the number of homeowners who lost their homes because of the housing crisis. More than three million others owing $88 billion have fallen at least a month behind or have been granted temporary reprieves on payments because of financial distress.