When President Biden signed a Executive Decree canceling up to $20,000 in student debt, the most obvious beneficiaries were students. But many parents could also share the relief, as millions of them have taken out loans to fund their children’s education.
“There are a significant number of borrowing parents out there, and they will take advantage of that,” said Mark Kantrowitz, student loan expert and author of the book. How to Apply for More College Financial Aid.
Due to the rising cost of higher education in the United States – the average academic year at a private college now costs $38,185 — students applying for financial aid often maximize what they can borrow from the federal government, but still cannot afford their tuition. In many cases, their parents make up the difference by taking out loans themselves, leaving both generations in debt.
The numbers on this issue are sobering. According to a recent study According to think tank The Century Foundation, more than 3.7 million American families owe money on federal Direct PLUS loans — colloquially known as “parent PLUS loans” — which help parents pay for undergraduate college programs. their children. Among these families, the median debt at graduation is about $29,600.
“Very few parents actually borrow … to help their child get a high school diploma, but those who do borrow a lot,” Kantrowitz said.
So, for many families, Biden’s executive order could offer much-needed help. The plan provides relief in two ways: First, it extends the pause on federal loan repayments through Dec. 31, 2022. And second, it forgives up to $10,000 in debt for those with loans held by the Ministry of Education. Those who have received Pell Grants are eligible for an additional $10,000 in aid, for a total of up to $20,000.
Can parents benefit from this help? The answer is complicated. Some loans qualify, some don’t, and many fall somewhere in between. Additionally, the government is still gradually explaining the details of the plan, so answers may change over time — and to further muddy the waters, Republicans opposed to aid can challenge the order in court.
“Congress never contemplated this as an authority of the president,” said Scott Buchanan, director of the Student Loan Service Alliance. “We are developing a program that has no framework in law.”
Here’s an overview of the loans currently eligible for relief and how financial advisers can help clients get it.