Kelsey Sandefur didn’t know about Ball State until a quiz told her it would be a great fit for her needs. She wanted a school that would help nurture her singing talent, and when the quiz told her about Ball State, it became her first choice.
She visited Ball State and had “the feeling” – something she hadn’t experienced at the other schools she had toured. For her, the decision was clear: She would attend college at Ball State.
When Kelsey and her dad came to Ball State in June 2013 for Kelsey’s orientation, they, like all other incoming freshmen and their families, went to a meeting about paying for college in Pruis Hall. Parents sat at the back of the room and students sat closer to the front.
During the part of the presentation that talked about financial aid and expenses, Kelsey searched the crowd to find her dad.
She spotted him near the back, wearing dark sunglasses. A military man of very few emotions, his face screamed of a defeat he had never before let shine through. Kelsey said he looked more defeated than she had ever seen him.
After the presentation, Kelsey met up with her dad before the next orientation program.
“I don’t know how we’re going to pay for this,” her dad told her. She saw the worry in his eyes, something she didn’t think she’d ever see.
But The Sandefurs have always found a way. They found a way to buy a cello, to pay for prom, and they would find a way to pay for college.
Kelsey’s mom Nancy said they had promised to contribute $12,000 toward Kelsey’s tuition each year — the amount needed to cover her remaining tuition costs. To do this, they planned to save $1,000 from each month’s paychecks, which is how they ended up with enough money to send Kelsey to Ball State in the fall of 2013.
But things didn’t go according to plan.
Nancy, Kelsey’s mom, fell at work in November 2013 and had to have her spine fused. She only returned to work in August 2015. An expensive medical procedure, almost two years off work while she healed, and Brad’s own tuition at Roosevelt University found the Sandefurs without the savings to keep their promise to Kelsey.
Her parents discussed the different options available to them to come up with the promised help. There was a home equity loan, considered and rejected, or a loan against her father’s pension plan, but his pension plan didn’t allow that.
Kelsey offered to help in any way she could, but Nancy said the money her daughter had saved from jobs over summers and breaks did not look like it was going to make up the difference.
Nancy said that she and Kelsey’s father felt like they were going to fail Kelsey if they could not come up with the money. For parents who raised their kids to want to attend college, this was unacceptable.
This is when parent loans from the federal government and the Parent PLUS program came into play. The Sandefurs had known about this option since Kelsey started at Ball State, but it was an option they never thought they’d need.
According to Sallie Mae, 15 percent of the money for college comes from student loans, 31 percent from grants and scholarships, 12 percent from the student’s own income and savings, 30 percent from the parent’s bank account, seven percent from parent loans, and four percent from family and friends.
On average, according to marketwatch by Dow Jones, total student debt increases by $2,726 every second. In the few minutes it has taken to read to this point in the story, student debt has risen by around $57,000.
At the federal interest rate of 6.84 percent, $25,000 in student loans spread over ten years ends up costing $34,585.66. Spread that $25,000 over 20 years and the total amount paid increases to $45,943.45.
Compare this to $45,327, the average yearly income for a new college graduate in 2013, and there is no wonder One Wisconsin Institute, a research organization looking into national student debt, found that students were paying off their loans over an average of 21 years.
Nearly 60 percent of families consider paying for college to be a team effort, according to Sallie Mae.
“We felt we needed to do that,” Nancy said about the loan they took out. “It was our responsibility.” She and Kelsey’s dad had heard of college students who took a year off and never went back, and did not want the same fate for their daughter.
Parent PLUS loans made up nine percent of loans in the 2012-2013 academic year. That adds up to about $10 billion.
Karen McCarthy, the director of policy analysis at the National Association of Student Financial Aid Administrators (NASFAA), said Parent PLUS loans are viable options for many families.
These loans often come with lower interest rates than private loans, and are much more accessible. Where private loan companies look at a parent’s entire credit history to either approve or deny a loan request, and to determine the interest rate, Karen said the Parent PLUS program only looks for adverse credit history.
Adverse credit history includes bankruptcies, foreclosures, repossessions, and tax liens. Private loan companies look for those items, but also look at outstanding debt and repayment time.
The program “has to cast a wider net,” Karen said, to serve a broader population.
One downside to parent loans is that they cannot be forgiven as easily as student loans, which aren’t forgiven easily either.
Parent loans are also not eligible for an income-driven repayment plan like student loans are. Under an income-driven repayment plan, monthly payments are based on a person’s discretionary income, that income that is left over after bills have been paid. Karen said that students use the program because they generally start out making a smaller income, so they pay less of their loan amount back. The payment amount increases along with a graduate’s income.
But parents are usually established in their income.
This debt from parent loans cannot be passed on to the student, and cannot be erased if the student does not complete their education.
The upside for the government is that parent borrowers, by the numbers, have higher chances of actually paying off their loans. Default rates for the Parent PLUS loan in 2015 were 7.3 percent.
In comparison, student loan default rates in 2015 were about 19 percent.
For Kelsey’s parents, the parent loans came through where student loans and other options could not. Kelsey could not take out any more in federal student loans, and private student loans carry an industry average of between nine and 12 percent interest.
Without a parent loan, Nancy said Kelsey wouldn’t have been able to return to Ball State for her sophomore year.
Now that Nancy is back to work, the Sandefurs have been able to return to their original plan of saving money from each paycheck and contributing to Kelsey’s college education without a loan.
Kelsey has taken out loans of her own, so the Sandefurs have decided that Kelsey will repay her loans and her parents will repay their own.
“I don’t want her to start out in life with any more [debt] than she’s got,” Nancy said.
For Kelsey, who has scholarships and loans of her own to pay for college, parent loans allowed her to continue her education without the risk and price of private loans. Kelsey said she was confident her parents would find a way to help her out, like they always have.