When Debt Comes Back to Haunt You with Parent Plus Loans (2024)

Last updated on December 13, 2019 By Millennial Boss 32 Comments

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I wrote recently that we paid off $89,000 of debt and now we’re a debt free couple. Turns out that I was a bit premature in that announcement.

I had a conversation with my parents that reminded me that they still have Parent Plus loans from my education.

Parent Plus loans are loans that parents can take out to help their children payfor their education.

Like student loans, Parent Plus loans are becoming a national problem too.

From 2005 to 2015, the number of parents taking out Parent Plus loans rose from 700,000 to 2.2M.

Parents Taking on Debt for Their Kids

It was taboo to talk about finances growing up in my family.

I wish I could have had an open and honest conversation with my parents about how we were going to pay for my education before I entered college or even during college but we never did. I didn’t have the maturity to know any better.

My parents were so proud that I got into a great school and they think that all the debt they are in now was worth it and necessary.

My parents told me today that they owe $50,000 for my sister’s and my education combined and that the interest rate on those loans is 9%. Wowza.

Here I am planning early retirement and thinking I am “done with my debt” when my parents are struggling with my student loans still.

I have to help them.

One option I looked into was refinancing that debt into my name.

If you have your own student loans or you have a parent who has Parent Plus loans and you want to refinance (get a lower interest rate) allowing you to save money over the length of the loan – consider refinancing.

I’ve considered usingSoFi to refinance myparent’s loans into my name. I found outabout it too late for my own debt and had paid a 6.8% interest rate until I paid them off. I should have refinanced and saved thousands.

Myfiancé also still owes his parents thousands of dollars for a car that they purchased for him five years ago. His parents have nicely dropped what he owes to just the Kelley Blue Book value but it’s still debt that he owes.

I think baby boomer parents taking out car loans for their millennial children isquite common too.

Who is Responsible forPaying this Debt

The Baby Boomer generation probably shouldn’t have helpedMillennialstake on car loans and education loans by cosigning on those loans. They probably shouldn’t have stretched themselves thin by taking out parent plus loans and lines of credit against their home equity. They didn’t know any better though and either did millennials.

They were part of a generation that felt they should give everything to their kids and they had access to all different types of credit to do so!

So we have two choices here. My fiancé and I can be millennial stereotypes and mooch off our parents some more. We can let them continue to carry our debt well into their retirement years. We can complain about it and point blame at them or the government.

Or, we can do the right thing and take over all of our loans from our parents and start paying our fair share. Yes, it sucks because we didn’t really know what was going on when we took on the debt but we still did it and we are responsible for it.

We can’t be alone.

The Illusion of Saving Money Living at Home

Millennials have their blinders on when it comes to their parents. It’s not rare to find a millennial who believes that they’re saving money by living at home, staying on the family plan, or staying on their parent’s health insurance until they’re 26.

They’re not saving money. Someone is paying for their food, housing, and utilities even if they’re not.

Maybe if millennials look a little closer into it, they will see that many of their parents aren’t actually paying for any of this at all. It’s an illusion of security. It’s debt that’s carrying them and their parents through.

If you think your parents are helping you out by paying your student loans or your cell phone bill, ask yourself (or better ask them), are they really?

It’s possible that your cell phone, insurance, and even education were paid with debt dollars.

Or it’s possible that the money your parents are paying towards your housing and education should really go towards their retirement.

Interesting DebtTrends

Check out this Slate article about the trillions of dollars that American families owe in non-mortgage consumer loans. I think it’s interesting to see the rise in auto loans and student loans in the past few years relative to other forms of non-mortgage consumer debt.

Can anyone else relate? Do you have debt that has come back to haunt you?

2017 Update: I’ve since paid off the $6,900 of debt that my parents still held for my education. We found out that $43,000 of the debt was for my sister’s education. I decided to hold on refinancing the debt into my name for now and plan to help them out at a later point.