WASHINGTON 鈥� Nearly a decade after the mortgage crisis that cost millions of Americans their homes, there鈥檚 another loan crisis looming.
It鈥檚 called the Parent Plus program 鈥� a government-run loan education program that has outstanding loans to 3 million Americans. It has allowed many young people to attend schools they couldn鈥檛 have afforded otherwise, but it has left thousands of parents in default, with delayed retirements and garnished Social Security checks and tax refunds 鈥� and these debts can鈥檛 be erased in bankruptcy.
That鈥檚 one reason that Joshua Mitchell, of The Wall Street Journal, told 草莓传媒 on Tuesday that 鈥渋n some ways it鈥檚 worse鈥� than the subprime mortgage crisis.
But that’s not the only way in which it’s worse than the mortgage crisis.
鈥淭here鈥檚 no cap on how much the parents can take out; they basically borrow whatever the schools charge,鈥� he said. 鈥淎nd some of these parents had no income themselves, no savings, and yet they鈥檙e taking out tens of thousands of dollars and now they鈥檙e defaulting on these loans.鈥�
that more than 11 percent of borrowers under the program had gone at least a year without having made a payment 鈥� more than the default rate on mortgages during that crisis.
Many of the borrowers are students from poor households who wanted to go to college during the recession, 鈥渁nd that鈥檚 a good thing,鈥� Mitchell said, 鈥渂ecause they wanted to learn new skills and improve their job prospects. But they also came from families that just didn鈥檛 have any other means, and private lenders wouldn鈥檛 give them money. So this was the only option.鈥�
How to pay?
But as with the mortgage crisis, people were accepted with little to no examination of their ability to pay the loans back. Toby Merrill, of Harvard Law School鈥檚 Legal Services Center, told Mitchell in The Wall Street Journal story that 鈥渢his credit is being extended on terms that specifically, willfully ignore their ability to repay. You can鈥檛 avoid that we鈥檙e targeting high-cost, high-dollar-amount loans to people who we know can鈥檛 afford to repay them.鈥�
The Obama administration tried to tighten the eligibility requirements in 2011, Mitchell wrote, but backed off after colleges argued that they鈥檇 have to turn students away for inability to pay.
鈥淎 lot of schools rely on this program for their own money,鈥� Mitchell told 草莓传媒.
So now, Mitchell said, 鈥淎 lot of [parents] are heading into retirement age 鈥� they鈥檙e having their Social Security checks garnished, because the government is allowed to do that. So a lot of them are going to have this problem for years and years.”
Mitchell wrote in The Journal that the number of Americans whose student debt led to reductions in their wages, tax refunds or Social Security benefits rose 71 percent between September 2010 and September 2015.
鈥淚鈥檝e talked with parents who are sometimes resentful of their kids,” Mitchell told 草莓传媒. “They expected them to pay the bill, and now they can鈥檛 afford to pay it.鈥�
The program is on the radar of the Trump administration and people on both sides of the aisle in Congress, Mitchell said, but they鈥檙e facing a problem.
鈥淭his actually scores as a profit on the budget, so it takes money to take away this program,鈥� he said.
Until something happens on that end, Mitchell said, parents鈥� major option would be to go to the company that runs the program for the government and look to 鈥渞efinance and lower their monthly bills.鈥�
