As parents, we always want what is best for our children. What better way to provide them with the best opportunity to succeed than to send them to the best college or university? What happens when the costs of going to college are not completely covered by scholarships and financial aid? As a student, student loan debt is considered to be an investment in their future but is the same true for parents taking out loans on behalf of their student?

The Education Department data shows that there are currently nearly $101 billion in parent loans that are outstanding through the Parent Plus program. This is something that has increased by over $10 billion in just the last 2 years. With interest rates at 7.08%, these numbers will just keep rising. Since the cost of tuition has risen far faster than the average household income, this is leading more families to turn towards financial assistance and loans to help pay for college.

Although the tuition costs for these schools have drastically risen, the amount of Federal Student Loans available to students is set at $31,000 no matter how much their tuition costs. Caitlin Zaloom, who is an associate professor at NYU, wrote a book titled “Indebted: How Families Make College Work at Any Cost”. This book discusses the phenomenon which is referred to as “cultivating potential” which describes parents as seeing their kid’s potential as unrealized through high school. The book describes why parents may feel that they need to provide the best environment for their child to thrive, and why “only the best college” is deemed to be the ideal environment.

In his article titled “The High Cost of Cultivating Potential in Our Kids”, Jeff Selingo points out that the highest percentages of Parent Plus loans are being taken out at schools other than what we would initially have thought. For instance, only an estimated 6% of parents borrowed through a Parent Plus loan for Harvard University while 60% of parents borrowed for Duquesne University. The median loan amounts for these schools are as high as $78,439 for Quinnipiac University with a 33% Parent Plus loan borrow rate on top of the 60% with federal student loans.

After students get the financial aid assistance and their own federal student loans, the only other options are private loans or Federal Parent Plus loans. Schools are presenting the numbers for how much will be owed to the school with including these Parent Plus Loan numbers. While federal student loans are easier to work with during repayment with regards to payment plans that fit your annual income, Parent Plus Loans don’t have many of these same protections even if the parent loses their income. Defaulting on a Parent Plus loan can mean damaging the credit of the parent borrower while interest continues to build and wages continue to be garnished, leaving borrowers in impossible situations of which to try to dig themselves out.