ARE THINGS LOOKING UP FOR STUDENT DEBT: NOPE

Generally, debt is down for the American consumer. Mortgage debt and credit card debt is being paid down – but student loan debt is not. It stands at roughly $1 trillion and rising.

Why? For starters, during the recession many people decided to return to or stay in school because job prospects were so lousy. People were hoping to wait out the recession and improve their chances of getting a job when it was over.

Student debt has also increased because of the rapid rise in the cost of college tuition, which is growing faster than inflation. Also, Mom and Dad may not be able to contribute as much as they had expected to, because they may be unemployed.

Some of the college debt burden is also falling on students’ parents and grandparents; almost 17% of outstanding past-due student loans are held by those over 50, and almost 5% by those over 60, according to an economist at Barclay’s Capital. This is the time parents and grandparents should be saving for their retirement, not worrying about college debt.

My advice? Remember, your offspring can borrow for college, you can’t borrow for retirement.

There's No Place Like Home

Traditionally, “fleeing the nest” has been a rite of passage for kids heading off to college.  Both children and parents look forward to the new life-stage.  Kids eagerly anticipate their freedom.  Parents dream of a clean, vacant extra room in the home.

According to a recent study from the largest student lender, Sallie Mae, this year more than half of the students surveyed lived at home while attending college.  This is up nearly 9 percent from just last year with most of the rise coming from families with over $100,000 in yearly income.

The study also noted that there has been a noticeable change in the way college is paid for overall.  Students are carrying a larger percentage of the cost, up 6 percent from four years ago. Parents are paying 7 percent less.

Along with choosing less expensive colleges, remaining in the family home has become another popular tool to help offset  the high cost of higher education.  Postponing the “fleeing of the nest” is not, however, without complications.

I discuss this topic in Money Still Doesn't Grow on Trees in a chapter on kids moving back home but it also applies to kids who don't leave.

Both parents and kids must have a set of rules.  These rules won't be the same ones that you used when your kids were minors and you were completely responsible for them but your kids are not your roommates.  Remember, it is still your house.

Two very important issues that you need to clarify up front are “who pays for what” and “my house, my rules”.  Be specific.  Negotiate a fair contract.  For example, you're probably not going to set up a curfew but you want to be notified if your kid isn't going to be home when expected.  On the other hand, you're not going to enter his or her room to gather dirty laundry from the floor. Coordinate on a reasonable budget to determine “who pays for what”.

Parents, forget those paint swatches and hold back on ordering that new treadmill.  That “extra” room might not be vacant for a few more years!