Technical education can save parents from drowning in college debt

The move to broaden young people’s exposure to career paths beyond a four-year college degree just got a boost from the Wall Street Journal. The Journal reports that the default rate in the federal government’s Parents Plus program now exceeds that on U.S. mortgages at the peak of the housing crisis.

According to the article, headlined “Parents Are Drowning in College Loan Debt,”

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.

Parents Plus is “is one thread in a web of college loan programs that have come to resemble the subprime mortgage industry a decade ago, given the shaky quality of many of the loans,” the Journal reports. The problem with the program is that

the government asks almost nothing about 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.

The number of Americans with federal student loans grew by 14 million to 42 million from 2006 to 2016, according to the Journal. Overall student debt more than doubled to $1.3 trillion during that time. Nearly 40 percent of student loans, the great majority of them federal ones, went to borrowers with credit scores below the subprime threshold.

All this money drove a surge in college enrollment, which grew by 20 percent from 2005 to 2010—the biggest increase since the 1970s.

Not surprisingly, the Journal adds, about eight million Americans owing $137 billion are now at least 360 days delinquent on federal student loans. Another three million, who owe $88 billion, are at least a month behind or have been granted temporary reprieves on payments because of financial distress.

As of late 2015, nearly two-thirds of borrowers with Parent Plus debt were between the ages of 50 and 64, says the Journal. Nearly 40 percent of Americans age 60 and above with student debt—most of whom borrowed for children or grandchildren—reported skipping health-care needs in 2014.

A four-year college degree remains an excellent choice for many young people. But sobering statistics like these make clear that families should take a careful look at costs and benefits before they make post-secondary plans. (An article entitled “What To Know Before You Owe,” from the Minnesota Department of Employment and Economic Development, is a great place to start.)

After reviewing the facts, an increasing number of parents and kids may decide that a “learn and earn” plan—including a technical college degree, a certificate, or an apprenticeship—is the best way to go. Career paths like these can keep costs and debt low, or avoid them altogether, and lead quickly to a skilled job in an in-demand field.