Students may soon get a break on their student loan debt, but their parents won't, says Wall Street Journal reporter Annamaria Andriotis. In an effort to take some of the burden off of graduating millennials, some private lenders will begin offering parent loans that will provide the funds for education without making the students responsible. The loans will have a much lower fee than similar government programs, and will provide interest rates from 3.75% to 13% for 10-year plans. Sallie Mae plans to roll out a version of the loan next month.
Lenders see the new products as an area of growth in an otherwise sluggish lending environment. Colleges are helping push them in part because of a quirk in federal calculations. Unlike ordinary federal student loans, the parent loans don’t count on a scorecard in which the U.S. Education Department discloses universities’ median student debt at graduation. That can ease the pressure to keep tuition increases in check at a time when heavy student debt has become a political issue. Lenders and colleges said creditworthy parents stand to get lower interest rates on these loans than the federal government charges and that many parents want to take on the debt themselves without burdening their children.
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