Money pouring out of a mortarboard (Image: Shutterstock)

Student loan debt continues to grow but not because students are borrowing more. It’s because their parents are, according to savingforcollege.com.

Its publisher and vice president of research, Mark Kantrowitz, analyzed data from the National Postsecondary Student Aid Study, which is conducted every four years. The data shows that the average debt of college graduates with bachelor’s degrees increased only 1% from 2011-12 to 2015-16 — to $29,669 — but the average debt for Federal Parent PLUS loans grew slightly above 19% over the same period to $32,596.

Kantrowitz says the shift in borrowing from students to parents is due to students maxing out on loans, leaving parents to pick up the slack. The aggregate loan limit for federal student loans, known as Stafford loans, is $31,000 for students whose parents claim them as dependents and $57,500 for students independent of their parents.

Annual limits on student debt range from $5,500 to $7,500 for dependent students and from $9,500 to $12,500 for independent students. The ranges reflect different limits per year of college attendance — lower for freshman years, then steadily accelerating to higher limits for junior and senior years.

“More student loan borrowers are reaching these loan limits,” writes Kantrowitz. In the 2015-16 academic year, 40.3% of students reached the limit for Federal Direct Stafford Loans, up from 39.3% four years earlier.

The borrowing limits for Parent PLUS are much higher. There is no aggregate limit on Parent PLUS loans, and the annual limit is equivalent to the annual cost of a student’s attendance minus the financial aid the student receives. First, however, the parent has to qualify.

If the parent has an adverse credit history, the Federal Parent PLUS loan will be denied, and the student will be eligible to borrow more. Dependent students then can borrow as much as independent students.

Kantrowitz says reliance on Parent PLUS loans increases as the cost of the college does. The average Parent PLUS loan debt was around $55,000 when their student graduated with a bachelor’s degree from an institution charging $50,000 or more per year in the 2015-16 academic year. The Parent PLUS loan balance was $30,000 or less when their student graduated from a school charging $30,000 or less.

No matter how much money is borrowed under the Parent PLUS loan program, the interest rate will be higher than the rate for student loans: 7.595% plus an origination fee of 4.248%, deducted from each loan disbursement. In contrast, the rate for Federal Stafford loans for undergraduates is 5.045% plus a 1.062% origination fee, according to Savingforcollege.com.

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