Dear Mr. Berko: Our 27-year-old son graduated college with a degree in sociology. He is our only child, lives with three other guys and owes $112,000 on student loans. He has asked us to pay if off and said he will give us $200 a month. We’ve enclosed our financials for you to review. Please tell us whether we should cash in part of our annuities, cash in part of our individual retirement accounts, withdraw from our certificates of deposit or take a mortgage on our home. He recently found a job at Starbucks and can pay us from his wages and tips.
— TE, Joliet, Ill.
Dear TE: No, a thousand times no! Don’t be daft and don’t dip into your retirement money. A college degree and your kid pours coffee at Starbucks?! Pray he marries well! Like many parents, you’ve yet to learn that most kids who borrow from parents don’t feel an obligation to repay them. What in blazes did he do with that $112,000?
In November, the Government Accountability Office (GAO rhymes with dough) announced that the U.S. is on track to forgive about $108 billion in student loans. Last year, more than 3,000 people a day defaulted on their federal student loans. This year, the Trump administration’s “special” income-driven repayment plan will write off about 10 percent of existing loans, and those write-offs may grow annually. According to the GAO, borrowers under the income-driven repayment plan have an average debt of $67,000 (some owe over $200,000), and the numbers are growing. Total student debt is $1.4 trillion, which is among the most outrageous boondoggles in history. And moonstruck millennials, whose numbers have surpassed the baby boomers as the nation’s largest living generation, have sucked this teat dry. These wastrels have used our tax dollars as slush funds to purchase cars, buy motor scooters, pay rent, buy concert tickets, take European vacations and buy clothes, wine and pot.
Your kid pours coffee at Starbucks, and without job skills, he probably isn’t qualified for very many other jobs. What’s the worst that could happen if he were not to make payments on his student loan? He wouldn’t be arrested, placed in jail or pilloried, though I’d recommend it. Sign him up for the government’s income-driven repayment program. The IDR program will cap your kid’s monthly payments at 10 percent of his discretionary income, which is defined as adjusted gross income above 150 percent of the poverty level. The federal poverty level is $12,000 a year, and 150 percent of that amount is $18,000. So 10 percent of everything your kid makes above $18,000 will be used to pay off his student loan. If your kid takes home $20,000 a year, his loan payments will be $200 a year. At this rate, this loan will never be paid off, because annual interest will exceed his payments. So after 20 years of his making silly $200 annual payments, the government will forgive the balance because accruing interest will be higher than the original amount owed.
