"Forgive Student Loans" is one of Occupy Wall Street's strongest demands. Today, President Barack Obama unveiled a plan to consolidate college student debt totaling around $1 trillion. Repayment will be income-based. What does this mean for parents and students?
Student college costs
Completing the first two years at a community college and transferring to a four-year school reduces costs. But community college costs are escalating. At most four-year schools, tuition is based on state residency. Community college students must also figure in commuter costs. Muskegon Community College in Michigan estimates out-of-county student costs at about $30,000 for 60 credit hours, plus books, supplies and transportation. The average bachelor's degree costs about $60,000 to $100,000.
Federal Pell grants down
President Obama staved off cuts in the federal Pell grant program. The maximum Pell grant amount is $5,500 per year. But the average student gets about $2,300 per year. That's the amount for parents who gross $50,000 per year, with two kids in college, regardless of their grades. Based on that income, parents are expected to contribute $4,000 per year, per college.
Tuition tax deductions capped
Parents can claim most tuition and fees on their federal income taxes. Some items are deductible under the American Opportunity and Lifetime Learning credit. Room and board or transportation for commuter students are not. The credit is capped at $2,500 and $2,000. Even with grants and tax deductions, about 50 percent to 80 percent of college expenses is pay-as-you-go.
Student loans require cosigner
To get student loans, undergraduate students generally apply for Parent PLUS loan, which requires a parent cosigner. Even students who have taken out vehicle loans need someone to guarantee college loans because the debt incurred is generally large. To protect privacy, parents cannot access student financial aid information without the student, but they are expected to pay any defaulted loans they cosign for.
Parents refuse to cosign
Occupy Wall Street says families shouldn't have to drown in debt or declare financial bankruptcy to help their kids get an education. That's what prevents many parents from cosigning for student loans. Experian says parent credit rating is affected by assumed student debt.
Majority opposes canceling student loans
Rasmussen Reports said 66 percent polled oppose the president's plan. They think federal funds should be spent to assist those who have not gone to college. Some parents, like Chris Tulgestke, of Grand Haven, Mich., believe there are better ways. "Student loans should not be forgiven based on income. Payments should be lowered and stretched out based on income, but not forgiven," Tulgestke says. Twenty-one percent favored forgiving the debt. Kay Wittenhauer of Rochester, N.Y., says, "I feel people who received government funds to pay for college have an advantage over those who had to pay for college themselves, so I'm in favor of the government leveling that playing field."
Marilisa Kinney Sachteleben writes about parenting from 23 years raising four children and 25 years teaching K-8, special needs, adult education and home-school.
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