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Should College Graduates Pay Back Parents’ Loans?

This article was written by in Education. 14 comments.


This month, the Naked With Cash participants and financial professionals are discussing education, primarily paying for and planning for college, whether it involves paying back their own loans, funding their own education, or saving for their kids’ future college expenses. In August, colleges across the country begin their fall semesters, so it’s a great time to be discussing education.

An undergraduate degree is a milestone for entering the middle class, breaking away from generational poverty or low socio-economic status. The cost of a college degree is an investment in the future and a great asset for building your human capital because, on average, people with college degrees earn about a million dollars more than those with just high school diplomas over the course of their lifetimes, according to the United States Census Bureau.

Because of this value society places on a college education, and because of other economic reasons, the cost of going to college continues to increase. The student loan industry has thrived, with 60 percent of college students borrowing to pay for at least part of their tuition costs according to American Student Assistance. When student loans aren’t enough, parents borrow money, too, to help their kids pursue their education less burdened by distractions like part-time jobs.

When I was in high school, visiting colleges, applying, and making decisions about how I wanted to spend the next several years of my life, I chose to go to the University of Delaware. I had some outside assistance to help pay tuition, but I also needed help from my own student loans. My parents borrowed money, too, most likely through the federal Direct PLUS loan program, an education loan designed for parents instead of students.

After college, my finances didn’t improve much. I was certainly not on the path of the average college graduate according to the federal census. With a career in non-profit and education, I would not be on track to earn the lifetime one million dollars above and beyond high school graduates. It took me a long time to pay off my student loans, particularly because I also decided to pursue a graduate degree.

Thanks to my side business, my time for eliminating student loan debt came sooner than it would have otherwise. In December 2008, about ten years after receiving my bachelor’s degree, I paid off the remaining balance and was free, no longer setting aside hard-earned income for the education and degree I received a decade prior.

It’s possible that at this time, there were still financial remnants of student loan debt in the form of the loans my parents initiated. I don’t honestly know whether any debt remains today, but it does raise some questions about children’s obligations. From a legal perspective, the student is not responsible for these loans, but is there any situation in which the child who benefited from parents’ loans should help with those payments?

The question might come down to one that is more basic. When parents help pay for their children’s education, should those children feel obligated to repay their parents? Or is there an understood agreement that children might “pay it forward” and use the money that could go to repaying parents to funding their own children’s education instead? Some might even say that children have no obligation whatsoever, as the parents’ decision to borrow for college was likely done without asking the student, and therefore the student shouldn’t be responsible for the financial decisions of the parents.

The assumption here is that parents are willing to help their children afford a college education. That isn’t always the case, either out of their judgment that their children should fund their own education, soaking in any appropriate lessons about personal responsibility, or out of an inability to afford to pay, even with loans. These are valid situations, but the question many graduates who did receive financial help might consider, whether to repay parents for their assistance, is just as valid.

These are the questions for discussion among those who did receive assistance from parents or who can empathize with those who have.

  • Should children who received financial assistance from their parents endeavor to repay those parents once their financial livers are in order (or sooner)?
  • Is this repayment any more imperative (if it can be considered at all) if the parents borrowed money (in addition to the student’s loans) in order to help their children pay for college tuition and costs?
  • Would a student who received financial assistance from parents be more likely to be willing to assist their own children as they look towards funding the expenses of higher education?
  • From the parents’ perspective, would you ask your children to help you pay back your PLUS Loan? Would it depend on the financial situation of the graduate?

I don’t recall hearing any stories about college graduates paying their parents back for the money they provided to help attend college, especially if that money came in the form of a PLUS Loan, but that doesn’t mean it hasn’t happened. If you have personal experiences to share, please do.

Photo: Flickr/mathplourde

Published or updated August 23, 2013. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 14 comments… read them below or add one }

avatar jim

I don’t know really. What are the circumstances where parents need to borrow money? When I went to school I borrowed money in my name and that was it. My parents didn’t take out loans. It seems to me that if the parents are struggling financially then there should be other aid available because student need is really based on parental finances. I guess I just don’t understand when parent loans really come into the picture.

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avatar Pretired Nick

Heh, it’d be nice if they felt obligated, but I don’t think that’s going to happen. I paid my own way through, but it seems like these days everyone is leaving school with a ton of debt. I figure it’ll take a major cultural shift for kids to step up to pay their parents back!

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avatar SLCCOM

You could take my niece-in-law’s approach, and just tell your father-in-law point blank that you will not be paying back the loans he took out for your husband.

I’m not overly fond of her. And my nephew is a wimp who does as she tells him.

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avatar Mark Ross

I think if the parents helped you in your finances during your college years, it’s also a good thing to repay your debt to them at some point in time when your finances are doing better than them. They could use that money of yours when they retire and besides that, they are your closest relatives.

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avatar No Waste

Before declaring myself financial independent, I will be paying my parents back for what they spent on my college degree (it was 50/50 loans/parents).

They would never expect this, but it’s something I want to do.

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avatar FI Pilgrim

I didn’t attend college so I can’t say for sure, but I think if I had (and my parents had helped) then I would have felt compelled to pay them back. Especially since I’m the oldest of 7 children.

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avatar qixx ♦1,890 (Half-Dollar)

I know someone that was told they would have to pay back any Parent signed loans. They instead just took out personal Student Loans through their bank. While not student loans i did have parents take out a car loan for a car for me at one point in time. While i was expected to pay it back after driving the car for a few years i gave them the car back. They had actually paid off the loan in the first year. Essentiallially i rented a car from them for the low cost of $1000 over 3 years. I did not care for owing money to family and won’t be involved in that again on either side.

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avatar Ceecee ♦53 (Newbie)

One would assume that parents are more financially savvy at the time than their college freshmen. I would think that they would make clear the conditions of their loan, if there are any conditions. Anyone loaning money should do this. If the money is a gift, then make that known.

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avatar Harry Sit

It depends on who’s relatively better off. If the parents are ill-prepared for their retirement and the child is now well established, the child should repay the parents with interest and then add some more. If the parents are still doing well but child doesn’t have a good job, then don’t repay.

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avatar Lucy Godwin

I like the idea of paying it forward, that children can repay the favour by paying for their own children’s education. Unless, of course, the money/loan was given with a set understanding that it would be paid back. Or, similar to what Harry Sit said, if the children are in a significantly better financial position than their parents and paying them back wont hugely impact their own family, I’d imagine they would *want* to pay them back.

Although I don’t know the situation in full, based on the information SLCCOM’s gave, I have to disagree with his/her comment. If two people get married, and are building a future together, I wouldn’t expect them to pay anything back, unless the future husband made this clear to his future wife very early on.

At the end of the day, everyone family’s dynamic is so different – I think the most important thing is to clearly communicate expectations from the beginning and to consider what is possible/likely to happen in the future.

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avatar SLCCOM

My nephew knew that those loans were for him to pay back. My niece in law was dating my nephew when they were in college and knew that. She just decided to blow him off. And my BIL and SIL are very hard up with their own student loans, a daughter with brain cancer, and some other issues that my nephew knows. As does is wife.

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avatar Lucy Godwin

That’s a shame – it’s sad that money sometimes reveals people’s true colours and/or intentions. I hope your niece-in-law or nephew recognises the impact of the situation sooner rather than later.

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avatar SLCCOM

That would require a conscience….

We did tell my BIL that taking out those loans was a bad idea. As usual, we didn’t know what we were talking about. Shrug.

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avatar Ivan Widjaya

This is actually a custom in certain countries like the Philippines. It is not that parents ask their sons and daughters to pay back the tuition. It is just that the family is so poor that the son and the daughter will feel obliged to help. It is actually a good custom because it prevents the child to squander his money on useless items. But maybe it is just me.

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