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College Loans: How Much Should Parents Borrow?

How much should parents borrow for college?

I had a father recently ask me that question. He was particularly interested in how much he could safely borrow from the federal PLUS Loan.

Curiously, college loans for parents isn't a subject that gets much attention. The focus has traditionally been on how many college loans students can handle. The average graduate leaves school with student loan debt of $23,200.

For families, college usually comes at an inconvenient time. The kids are heading off to college right when the parents realize that retirement is looming and they haven't saved enough.

Students relying on federal loan programs are limited to how much they can borrow each year. In contrast, parents are free to borrow far more through the federal parent PLUS loan program. Parents can borrow as much as the cost of attendance of their child's college minus any financial aid they've received.

With home equity loans, which is often a lower-cost option, there are no restrictions on how much parents can borrow.

So this gets us back to how much parents should borrow for college. While there is no one-size-fits-all answer, I think parents will have a better idea of how much they can afford by using these two college calculators at the College Board:

Parent Loan Replayment Calculator
This calculator generates the monthly tab you'd face based on the loans you assume. If you borrowed a total of $40,000 through PLUS loans, for instance, the monthly payment would be $495.

Parent Debt Calculator
This calculator can help you determine how much college debt you can reasonably assume after considering your other monthly bills.

Lynn O'Shaughnessy is the author of The College Solution. She also writes for TheCollegeSolutionBlog. Follow her on Twitter.

College loan image by Ian Ruotsala. CC 2.0.

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