Parents with student loans could fall into default if they don't take steps soon

By Jillian Berman

 'Time is running out': For years, parents have struggled under the weight of the loans they took on to help their kids pay for college. It's about to get worse, advocates warn. 

 Parents will often do whatever it takes to help their kids get to college. Now their options for affordable loans may be dwindling, advocates warn. 

 Noell Scott expects to die with some of the debt she took on a few years ago to pay for her kids' college. Now, she's racing against a deadline to take advantage of a program that can at least make the payments more manageable. 

 For months, Scott, 55, has been trying to lock in an affordable payment plan on her loans with the help of a legal aid organization. For borrowers like Scott, who have Parent PLUS loans, the option to lower their monthly bills through programs like income-driven repayment will disappear after July 1 - unless they take action. To preserve their access to these plans parent borrowers need to consolidate their loans and make at least one payment under an income-driven plan before the deadline. 

 With Parent PLUS loans Noell Scott could help her kids attend college. 

 Scott has been working with a legal aid organization to take those steps. She's gone back and forth with multiple servicers trying to address an issue that came up in the consolidation process. Until that's resolved, she can't apply for an income-driven repayment plan. If the process isn't completed by July, Scott will lose access to payments she can afford. 

 Scott said she's "scared," about the fate of her $164,000 in debt. "It's really stressful. Because I don't have a lot of money and I was a single mother for so long, I'm very careful about my budget - I keep spreadsheets." 

 When Scott took on the Parent PLUS loans in 2021, she did it to help her kids reach their potential. Their father passed away in 2014, and Scott wanted to deploy all of her resources as a single mom toward their success. 

 "We never owned a house, I couldn't buy them cars, I couldn't do any of that kind of stuff," but, with the loans, they could go to college, she said. "I did know what I was doing. I made a decision, and I do plan to pay them off as best I can." 

 Options to manage student debt in old age are dwindling 

 Like Scott, millions of parents across the country took on federal loans to help their kids pay for college with the hope that the education would lead to their children's success. For many, it puts their retirement and comfort in old age at risk, and now the options for parents to better manage the debt will soon be dwindling. 

 The Republican tax and spending bill passed last year got rid of parents' access to payment plans that calculate the monthly bill as a percentage of a borrower's income. Unless they complete a consolidation of their loans by July and make at least one payment under these plans, even borrowers who have had this debt for years will lose access. 

 Processing the consolidation and applications could take months, so experts are urging borrowers who need these plans to take steps now if they hope to stay eligible. 

 Consumer advocates and legal aid attorneys have been concerned for months that not enough parent borrowers are aware of this looming deadline. If these borrowers lose the chance to enroll in these more affordable repayment plans, it could push them toward delinquency and default. 

 'I have a pit in my stomach over what we're going to be dealing with these Parent PLUS borrowers a year from now, two years from now, four years from now.'Betsy Mayotte, Institute for Student Loan Advisers 

 "Time is running out," said Betsy Mayotte, the president of the Institute for Student Loan Advisers, who works with student-loan borrowers. "The messaging is getting out there, [but] I have no illusions that it's getting to everybody who needs to hear it. I have a pit in my stomach over what we're going to be dealing with these Parent PLUS borrowers a year from now, two years from now, four years from now." 

 Meanwhile, parents considering taking on these loans will have less room to use them to finance their kids' schooling. For decades, parents could borrow up to a school's cost of attendance through the PLUS program. Going forward, they'll be capped at $20,000 per year per child and a lifetime maximum of $65,000 per child, thanks to One Big Beautiful Bill Act provisions. 

 The idea behind the changes was to protect families from taking on unsustainable debt and to remove an incentive for universities to keep prices moving higher. But some consumer advocates worry that the changes could push families toward riskier private loans or leave them without enough funds to finish paying for college partway through. A parent borrowing the annual maximum will hit the lifetime maximum before the end of four years. 

 Carolina Rodriguez, the director of the Education Debt Consumer Assistance Program, which works with student-loan borrowers, said that even if a student has their entire tuition covered, the cost of room and board for four years could exceed the maximum amount available to parents. 

 "You're going to now be steered to private loans to make up the difference," she said. Adding more sources of loans can make them even more complicated to manage. "All it takes is for a parent to be without a job for you to default." 

 The loans have posed challenges to families for years 

 Though the recent changes to the Parent PLUS program were spurred by Trump and Republicans, for years there's been agreement among liberals and conservatives who follow this issue that these loans are posing challenges for families. The government provides the loans to parents regardless of their income. and, since they could borrow up to the cost of attendance, the loans can leave families in an unsustainable position. 

 About 56% percent of parents in the program are borrowing on behalf of students who would qualify for a Pell grant, the money the government provides to low-income students to pay for college, according to the Brookings Institution, a think tank. And families can struggle to repay the debt. Even at public universities, which have the best outcomes repaymentwise among parents who take on the debt, borrowers still owe 47% of their initial balance after 10 years. 

 Given the timing of the borrowing, that could send parents into old age with the debt. 

 It wasn't supposed to be this way. When Parent PLUS loans were originally conceived, the idea was to provide liquidity to families who could generally afford college but struggled to pay the full cost of a year of tuition up front. 

 Howard McGinn, chief executive of Iron Bridge Resources, a higher-education consulting firm, remembers decades ago when, as a loan officer at a bank, he gathered on a college campus with lawmakers and others to celebrate sending out the first PLUS loan to parents. 

 "We thought it was fantastic," said McGinn. Now, McGinn said, he thinks that "maybe we created a monster." 

 In 1992, the government scrapped debt limits that were placed on Parent PLUS loans. In the years since, schools, working with consulting firms, have focused on maximizing the amount of tuition revenue they could receive per incoming class of students. Parent PLUS loans have been a part of that effort, according to new research. 

 From the archives (December 2025): Trump administration moves to scrap Biden-era student-loan repayment plan 

 A recent report from Stephen Burd, a senior writer and editor at the think tank New America, found that colleges across the country spent a significant portion of their financial-aid budgets on wealthier students by offering them so-called merit aid. They might offer these families a relatively small discount to convince them to attend and pay close to full price. In other cases, the schools might provide a full scholarship to a student with good grades and test scores to help boost a school's ranking even though that student's family could afford to pay. 

 That awarding of merit aid, according to Burd, has come at the expense of the lowest-income students. These students come from families with incomes of $30,000 or less. At the 23 selective private colleges Burd studied, these students were asked to pay an average of $24,000 a year. At the 18 state flagship universities he looked at, they were asked to pay an average of $14,000 per year.  In many cases these colleges left these households with little choice but to turn to Parent PLUS loans if they wanted their kids to attend these schools. 

 "While you're giving more money to wealthier students, at the same time you're requiring low-income families to take on more PLUS loan debt that they likely won't be able to repay," Burd said. 

 'We can't kill their dreams' 

 James Sisto and his wife decided to take on Parent PLUS loans for their four kids because they wanted to give them access to a quality education. 

 "They had dreams, and they had good strong convictions about them, so we said, 'Hey, we can't kill their dreams at 18, 19 years old, we've got to do everything we can to help them reach their goals,' " he said. 

 'We have great kids, and they're great young adults, and we would do this for them 10 times over.'James Sisto of Crystal Lake, Ill. 

 Sisto, who lives in Crystal Lake, Ill., first learned about Parent PLUS loans when he was visiting the Illinois public college his oldest son ultimately attended. 

 James Sisto and his wife used Parent PLUS loans to help their kids. 

 He remembers the conversation with the financial-aid adviser as something along the lines of, "Hey, don't worry about it if you've only got a year or two saved up." 

 "I was kind of drawn in about it," Sisto said. "They made it easy, almost too easy, to get them." 

 Now, Sisto, 60, is staring down his final working years with more than $300,000 in Parent PLUS debt and a monthly $1,400 payment. 

 "We have great kids, and they're great young adults, and we would do this for them 10 times over," he said. 

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