Student debt nearly destroyed this family’s finances

By Mandi Woodruff Valerie Shippen thought she was being frugal when she agreed to pay for only one year of college tuition for each of her four children. The 49-year-old Ipswich, Mass., schoolteacher and her husband, Peter, an electrical engineer, both went to college and graduate school. They wanted to do whatever they could to give their children the same opportunities. They assumed they would get help from financial aid, but like many middle-class households, their bids for federal financial aid were denied. It didn’t matter that three of their four children were in college at the same time — on paper, they looked better off than most, though their reality was far different. “All three kids were in college all at the same time and we didn’t have cash saved up,” Shippen says. “We had to finance everything.” SInce each of their three kids decided to attend private universities, their financing options were limited. They could have taken out private loans, which would have meant higher interest rates and fewer flexible repayment options. But when they found out the schools participated in the federal direct loan program, they opted to take go with Parent PLUS loans instead. They borrowed just enough to see their kids through their undergraduate degrees, with the understanding that each would pay off 75% of their loan balance after graduating. (Parent PLUS loans allow parents to take out student loans under their name on behalf of dependent undergraduates). With all three kids attending private universities, their collective student debt bill quickly grew to more than $500,000. Two of their children have managed to pay off their debt since graduating, but the couple is still strapped with more than $150,000 worth of loans and will add more to their load when their youngest son graduates next year (though, thankfully, he went to a public school). When Peter lost his job briefly a few years ago, they came close to losing their home and refinanced their mortgage in December to help pay for their eldest daughter’s wedding. “It has just killed us,” Shippen says. “We have no retirement savings. We’re on a 25-year repayment plan and still paying $1,700 a month. It’s like having another mortgage payment.” Although their loans are federal and they have the option to apply for an income-based repayment plan, the Shippens were told their combined income was too high to qualify. Their story is extreme but not altogether uncommon. Read the full article here:

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