A few days into December, I got a text from my mom telling me she had made her last student loan payment, bringing to an end a nearly three-decade period of paying tuition or student loan bills.
As a journalist who covers personal finance, I get more excited than most when I hear about people paying off debts. Writing about the crushing effects of debt makes me want to throw a party every time someone I know pays theirs off. But when my mom told me she had paid her final student loan, I felt particularly giddy.
You see, my parents did something a lot of people would advise against: They borrowed student loans for their kids’ educations.
There are a lot of reasons why some say this is a bad idea. For one thing, the interest rates on federal Direct PLUS loans, the federal student loan option for parent borrowers, are relatively high (currently 6.84%). There’s also the fact that parents with college-age children tend to be within a decade or two of the typical retirement age and may be better served by saving money than going into debt for someone else. Another argument is that if you get to a point where the parent has to borrow money for their child to go to college, they should be looking at cheaper schools.
Despite all these reasons not to, my parents went ahead and took out student loans for each of their three children. The ones my mom took out for me were exceptionally expensive: one for $10,000 at a 7.9% APR, one for $9,105 at 8.5% and one for $5,500 at 8.5%. (Interest rates on some loans she took out for my sister, just a few years older than I am, were about half that.) On top of taking on debt, my mom made monthly tuition payments totaling $13,750 over four years.
Instead of putting the burden on my parents, I could have taken out $38,355 in private student loans (though they probably would have had to co-sign them). Add that to the roughly $26,000 in federal student loan debt I actually graduated with and continue to pay off (average for my graduation year), and I would have been more than $64,000 in the hole as a 22-year-old.
I can’t say with certainty how that would have made my life different, but I know it would have. Since I graduated, I have been able to develop my career based on my interests, not just potential salary, because my debt was manageable. I’ve had the flexibility to save for the future while also spending money on fun things, and both of those things would have been much more challenging with hundreds of dollars more a month going to student loan payments. I’ve been able to start my adult life on solid financial footing, in no small part because my mom helped me pay for the education that got me here.
Perhaps you’re thinking I should have gone to a less expensive school. Maybe I should have. The point is I’m very grateful to have graduated with only $26,000 in student loan debt. It seems like an odd thing to be happy about — being thousands of dollars in debt — but I’m just glad I’m not drowning in student loan payments like I could have been. Unfortunately, so many people are.
I totally understand why there are camps of people who say parents shouldn’t borrow for their kids’ educations. After all, my story is one of success: I graduated and got a job that allowed me to become financially independent from my parents almost immediately. The risk was that multiple people would go into debt for an education that never resulted in much money. Or I could have graduated unemployed and asked to move back in with my parents for a while, at which point they would have spent thousands of dollars and still have to decide if they should continue to help support me or not. I imagine it’s hard for a parent to choose where to put the burden of that risk, because as much as parents may want to protect their own financial goals, the alternative to saddling your children with tens of thousands of dollars in student loan debt isn’t all that appealing, either.
Best-case scenario, parents can pay off their debts early and save money on interest, leaving more time and funds to meet other financial needs. For example, my mom saved nearly $6,500 by paying off the loans for my schooling about 5 years ahead of schedule and enrolling in automatic payments for an interest rate reduction of 25 basis points, a common auto-pay perk many student loan servicers offer. Those are both good tactics for all student loan borrowers to consider. I’m employing both to tackle my own debt.
A lot of students figuring out how to pay for college will read and hear about strategies that will help them save money: Go to a school that will discount your tuition with a merit award; apply for as many outside scholarships as you can; get a job to help pay for your education expenses. Those are decent tips, and I followed every single one. Still, they don’t necessarily help you (or your parents) avoid a lot of debt.
I’m incredibly grateful my mom took on student loan debt so I could start my adult life without too much debt of my own. Her help puts me in a privileged situation, and I’ll try to not take it for granted. What my mom did for me motivates me to be as responsible and generous as I can be with my own finances, someday hopefully being able to help my future kids the way my parents did with me and my siblings — and maybe if I’m lucky, a college education won’t cost half a million dollars by then.
More on Student Loans:
- How Student Loans Can Impact Your Credit
- Can You Get Your Student Loans Forgiven?
- Strategies for Paying Off Student Loan Debt
Image: Margaret Distler / byandmarge.com