By Diane Lee (WSPA)
(SPARTANBURG , SC)
A new report shows that more than 40% of people who took out federal student loans are unable to make payments.
The cost of college is becoming so overwhelming that even parents are applying for loans.
7News talked with USC Upstate student, Joey Pacific, who said that his mother applied for a Federal loan to help pay for his college education, even though she couldn’t afford it.
“I’m the oldest of 4 kids, and she’s a single mom, and the money that she makes is hardly enough to support our family.” Pacific said.
Pacific’s mother got approved for a loan, but at a rate of more than 13%.
“We were horrified because it would have been in her name.” Pacific said. “She would have had to pay back the full amount which just wasn’t an option.”
But now, parents have several private loan options. Lenders like SLM Corp (widely known as Sallie Mae) and online lender Social Finance (SoFi) are among those who are extending loans to parents.
The interest rates for these private loans are often much lower than federal loans given to both parents and students.
Yet, financial advisers say there are big risks.
We talked with the Director of Financial Aid at USC Upstate, Reed Allison, and asked him what parents needed to know about private loans.
“You may not have the safeguards with these type of loans such as consolidation, or deferment, as you might with some of the federal loans. In absorbing this loan debt, don’t sacrifice your retirement savings to pay for your child’s college,” said Allison.
Pacific was denied any subsidized loans since his mother was approved, so he’ll have to pay back federal and private loans.
“It’s daunting… I try not to think about it.”
But he’s still glad his mom isn’t stuck with a debt that would crush any chance of a happy retirement.
IPEDS: (statistical data)
NSLDS: (individual information for current loan borrowers)
FSA: (general federal financial aid information)
Peterson’s: (annual survey of statistical and financial data for individual colleges and universities)