When Steven and Paula Bonney took out $115,000 in loans a decade ago to put their two daughters through school, it was more than they ever thought they’d have to borrow. But they expected to be debt-free at this point in their lives.

Now, in their early 60s, any dreams they had of retirement are buried deep under a mound of debt.

Like the Bonneys, 21% of parents took out college loans for their kids in 2011, a sharp increase from 13% in 1999, according to the National Center for Education Statistics. With middle-income families shouldering more student debt than low and high-income households, parents all over the country are making plans to work longer than ever before.

The Bonneys, who live in Mattapoisset, Ma, worked long hours at their own small businesses to stay ahead of their debt obligations. Steven had a general contracting company while Paula was building a growing bookkeeping business. But all the work came to an abrupt halt six years ago when Steven fell from a 25-foot scaffold and broke his neck, leaving him paralyzed from the waist down.

Even before the accident, the Bonneys were struggling to pay off the six-figure debt from the Parent Loans for Undergraduate Students (PLUS) loans they borrowed for their daughters, Jaime and Skye. Combined with the flood of medical bills, their bleak financial future has pushed them to the brink.

When Paula is not taking care of her husband’s physical health, she works full-time as a bookkeeper and payroll specialist. But they’ve still fallen behind on their taxes and have had to tap into their retirement accounts.

"The interest that we owe on the loan is going to be more than the total cost of tuition, for both girls," said Steven. After nine years of monthly payments, their debt hasn't budged much and remains at $109,000.

While most families are able to avoid catastrophic accidents, it’s not uncommon to encounter serious illnesses and job losses. Even a small crisis can pull families already struggling with college loans into a downward financial spiral.



Help with tackling student debt



Before borrowing for college, it’s crucial to examine the short-term and long-term financial implications of your decisions, says Kevin Fudge of the American Student Assistance program.

“People look for an academic fit when choosing a college, but it’s just as important to look for a financial fit as well - particularly if you plan on supporting more than one child through college,” says Fudge.

In addition to choosing schools along a selectivity spectrum, Fudge strongly recommends picking schools along a cost spectrum, making sure to include a financial aid safety school. This option would allow a family to afford the education with limited or no financial assistance. In many instances, that would be a two-year or four-year public college or university.

For families already knee-deep in debt, Fudge breaks down some repayment options that can reduce the minimum monthly payments to less than the payments required under a 10-year standard repayment plan.

These options include extended repayment or graduated repayment, which can be a term of 12 to 30 years, depending on the cumulative student loan debt. Having a longer repayment period reduces the monthly amount, but increases the overall amount paid over the life of the loan.

Another option is income-contingent repayment, which allows borrowers to extend payment to 25 years and ties their monthly payment to their income and cumulative debt. After 25 years, any remaining balance is discharged. Parent Loans for Undergraduate Students (PLUS loans) can only be eligible for Income Contingent Repayment if they are consolidated into a federal Direct Consolidation Loan.

Having counseled countless students and their families through debt management, Fudge says, “the more people understand their student loan repayment options and become financially literate consumers, the better they will be equipped to take advantage of their investment in college.”

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