At a Glance

The House of Representatives just voted to pass a resolution that would prevent 43 million Americans from getting student loan forgiveness. The bill would halt the Biden administration’s plan to offer $20,000 in federal student debt relief to individuals with incomes of less than $125,000. It would also end the pandemic-driven pause on federal student loan payments.

The pause on the federal student loan repayments will end “sixty days after June 30, 2023,” according to a 99-page draft bill that is part of the debt ceiling deal President Joe Biden and House Speaker Kevin McCarthy just agreed on this past Sunday. And don’t hold your breath for more pauses as it is outlined in the deal that there will be none in the future.

Student debt totals $1.757 trillion in the U.S., and the average federal student loan debt balance is $37,338, according to the Education Data Initiative. Should the resolution pass both the House and Senate, it would be felt.

However, it isn’t just the person who actually possesses the student loans that feels the strain. Paying for student loans or college tuition is often a family affair and specifically one that falls on the parents. According to a recent survey by College Ave Student Loans, one in three parents say they will help their child pay back some or all of their student loans. An economics study, published in the Journal of Personal Finance which used 12,500 American adults ages 18 and over, found that when taking out a student loan for one’s child, the risk for lower financial well-being increased. Lower financial well-being is described as parents who were more likely to report feeling that they could not obtain any of their life goals and are “just getting by financially.”

That is why Credello conducted a survey of 600 parents, who helped pay their children’s college education costs, both partially and in full, either directly or through student loans, in collaboration with Pollfish to investigate the impact of student loans on parents. The findings reveal that parents do feel the financial strain of sending their kids to college, but they have no regrets.

Key takeaways of Credello’s parents and student loans survey:

  • Out of the 600 parents surveyed who helped to pay their children’s education costs in some way, 19% of them partially paid for their children’s student loans and nearly 13% completely paid off the loans.
  • 34% of parents surveyed partly paid their children’s college tuition and 34% of parents surveyed completely paid their children’s college tuition.
  • Nearly 30% of the parents surveyed have spent between $10,000-$25,000 on their children’s tuition payments and nearly 1 in 4 parents (23% of respondents) have spent between $25,000-$50,000 on their children’s tuition costs.
  • 42% of parents surveyed revealed that paying their children’s student loans or funding their tuition made saving difficult, 51% said it decreased their disposable income, and 38% said it increased their stress levels.
  • Despite the financial strain of supporting their kids, 77% of the parents surveyed have no regrets.
  • Only 43% of the parents surveyed felt like they were adequately informed in the journey of funding their children’s education.
  • Only 9% of the parents surveyed expect to be paid back in full and 17% want to be paid back partially by their children.

Parents step in to alleviate the burden of student debt

Credello’s survey revealed that a number of parents stepped in to alleviate the burden of student debt on their children and help fund their college or higher education, whether by helping with loan payments or covering tuition: 19% of the parents surveyed partially paid off their children’s student loans and nearly 13% completely paid off the loans for their children.

Additionally, nearly 34% of parents surveyed paid their children’s tuition completely and the same percentage of respondents said that they partially paid for tuition.

Supporting their children came with financial setbacks

Supporting their children came with financial setbacks. Nearly 30% of parents surveyed have spent between $10,000-$25,000 on student loan payments and nearly 1 in 4 parents (23% of respondents) have spent between $25,000-$50,000. Almost 15% spent between $50,000-$100,000 and about 6% exceed the $100,000 mark.

That’s enough to put a dent in your bank account and affect your lifestyle and retirement goals. 42% of parents surveyed revealed that paying their children’s student loans or funding their tuition made saving difficult and 38% said it increased their stress levels. Nearly 22% said that it affected their family’s financial security and about 21% said that it changed their retirement expectations.

The impact wasn’t necessarily expected: 38% of parents surveyed said they did not feel adequately informed about the amount they would have to pay or were not adequately prepared to help.

Most parents have no regrets and don’t want to be paid back

Despite the downsides of helping fund their children’s education, most parents have no regrets and don’t even want to be paid back: 77% of parents said they don’t regret paying off their children’s student loans or college tuition. When asked whether they think student loans are worth the financial risk, almost half of parents (47%) said they would do it all over again and 23% of them said it was difficult but they felt it was the right choice.

The majority of parents don’t expect to get any money back from their children nor do they want to. Only 9% of parents expect to be paid back in full and 17% want to be paid back partially. About half of parents said that they don’t expect their kids to pay them back and 24% of them said that they wouldn’t accept their money if they tried to pay them back.

Student loan options in the U.S. include federal loans and private loans. Federal loans are based on financial need and offer fixed interest rates, flexible repayment plans, and forgiveness options. Parents’ financial standing can affect the amount of federal loans a student is able to access. As for private loans from banks or lenders, they come with varying terms and interest rates based on creditworthiness. Having a parent co-sign is usually either necessary or provides access to better rates.

Bottom line

If the Biden administration’s plan to provide mass student debt relief fails, it will impact the finances of millions of low- to mid-income Americans, including parents who sacrificed some of their own financial future for their kids.

This survey was conducted by a third-party survey platform – Pollfish, on behalf of Credello. The sample of 600 American parents (ages 35 through 54) who paid either part of or their children’s college tuition or student loans in full in the U.S. was surveyed on May 18th, 2023. The results have been weighted to balance responses to census statistics on the dimensions of age and gender. For complete survey methodology, please contact [email protected].