view transcript

Robert Powell: Parents and grandparents are increasingly taking out loans, typicallyParent Plus Loans to pay for their children's or grandchildren's college education and it's causing some problems according to some new research. Consider, among parents and grandparents taking out loans for children and grandchildren, only two and three say they save on a regular basis for retirement. That means one in three aren't saving on a regular basis. Also, nearly one quarter of all parents and grandparents who borrowed money report that student loans have led to conflicts within their families. Three and four of those who borrowed money took on this debt for children or grandchildren primarily out of a desire to help just under half felt it was their best option and one third felt obligated to do so. One in four said it was both desire to help and a feeling of obligation. What's more, the survey found that just less than one third of parents and grandparents with loans for dependent report that their family knew nothing or very little about their student loans.

Robert Powell: Given that findings, what are some of the most important things parents and grandparents need to know before taking out a Parent Plus Loan for their children's or grandchildren's college education? Here's what we published in a recent Retirement Daily article. One parent plus loans generally have the highest interest rates of any federal loan program, typically well over 7% and sometimes close to 9%. Two, Parent Plus Loans have fewer repayment options than federal student loans. They generally cannot be repaid under an income driven repayment plan. Though there is an exception if the loans are consolidated by the federal direct consolidation program, they can be repaid using income contingent repayment or ICR plans. But ICR is far more expensive than the more widely used income driven plans, like the income based repayment plan or the pay as you earn plans. For more, read TheStreet's Retirement section and subscribe to Retirement Daily, which publishes articles featuring the nation's top financial planners.

Parents and grandparents are increasingly taking out loans, typically Parent PLUS Loans, to pay for their children's or grandchildren's college education. And it's causing some problems according to new research sponsored by TIAA and conducted by the MIT AgeLab.

Consider:

Among parents and grandparents taking out loans for children and grandchildren, only 67% say they regularly save for retirement, compared to 87% of individual borrowers and 83% of those who borrowed for a spouse.

Nearly one-quarter of all borrowers (23%) report that student loans have led to conflict within their families.

Borrowers took on this debt for children or grandchildren primarily out of a desire to help (74%), with just under half feeling it was the best option (47%) and one-third feeling obligated to do so (34%). One in four said it was both a desire to help and a feeling of obligation (24%).

What's more, the survey found that just less than a third of borrowers with loans for a dependent report that their family knew "nothing" or "very little" about their student loans.

Find out what parents and grandparents need to know about Parent PLUS loans in the video above.

Also listen to our podcast to know more about it. 

Building Your Road to Retirement

Get more information and sign up for a free trial subscription to TheStreet's Retirement Daily

The Biggest Threat to Your Retirement? Check Your Basement

How to Choose the Right Medicare Advantage Plan

Everything Millennials Need to Know About Retirement - Ask Bob

Feature: What Kevin O'Leary Would Tell His 40-Year-Old Self

Success: Top Women Leaders Share the Keys to Business Success

Ask the Expert: Student Debt Seen at $3 Trillion in 10 Years - Expert

TheStreet Feature: Here's Something Investors May Be Missing About the Drone Revolution

Catch Up: Today's Top News Videos Below