Seniors with Student Loans: Debt on the Rise

Seniors with Student Loans: Debt on the Rise

Seniors with Student Loans Debt on the Rise At age 55, you start thinking about retirement, kicking up your feet, taking more vacations, playing lots of Sudoku and catching up on all those novels you’ve been meaning to read. Retirement is that time when you can start to enjoy the beautiful Los Angeles weather in the middle of a work day, when you’re not just in a rush to grab lunch and get back to your desk.

You’ve been saving for this for years. But there’s one thing: You don’t have enough money to get you to your dream. You still have student loans to pay back.

Most people are aware that recent college graduates typically have student loan debt, which keeps climbing year after year. But surprisingly, there’s also a high student debt rate among older individuals.

In California, the average debt on student loans is $22,191, according to The Institute for College Access and Success. That can put a serious dent in retirement plans.

Recent studies indicate that baby boomers are the fastest growing population segment of student loan borrowers, even though most borrowers are age 18 to 39. A report from the Consumer Financial Protection Bureau (CFPB) states that the number of student borrowers aged 60 or over has quadrupled over the past decade in the United States. The report is based on complaints submitted to the CFPB for loans from March 2012 through December 2016.

Baby Boomers Going Back to School — or Paying for It

Approximately 2.8 million people aged 60 or over have at least one outstanding student loan. The loan may be for his or her own schooling, or it may have been taken out for their child or grandchild.

Many baby boomers have left or been phased out of their original job. As a result, they may have chosen to return to school in order to obtain further education. They may want to change professions, or enhance their current knowledge in order to gain more satisfactory employment.

Other people have taken out student loans on behalf of their children or grandchildren. The loans were meant to provide educational options that otherwise would be unavailable to them. Even parents who put away money for their children’s education may find that it simply wasn’t enough.

In 2015, older consumers owed an estimated $66.7 billion in student loans.

Meanwhile, the costs of higher education are rising rapidly. A recent study by the Urban Institute shows that college expenses for room and board have risen at a higher pace than inflation and have doubled since 1980.

These rising costs make it necessary for loans to be higher than they used to be, even for those who have prepared for these expenses.

More Seniors in Default on Student Loans

Along with an increase in student loans by those over age 60 comes a rise in defaults on loans. Nearly 40 percent of federal student loan borrowers age 65 and older are in default, the CFPB reports. People over 60 are less likely to be able to repay a substantial loan. In some cases, the individual may be unable to work, may be unemployed, or be underemployed.

Even with an increase in retirement age, the ability to repay a student loan may be substantially hampered. Health and other circumstances may make it more difficult to repay creditors, especially student loans. Living on a fixed income can make loan repayment unfeasible.

Additionally, student loans are rising at a higher rate than other types of loans, according to a recent report issued by Bloomberg. Both auto loans and credit card loans are much lower than student loan debts. In the case of credit card debt, these debts are actually rather steady.

Parents may end up taking responsibility for their children’s college debt if they co-signed on the loan. If the child is unable to repay the loan, the parent may end up being on the hook for it. 

The CFPB estimates that 27 percent of co-signers on one or more outstanding student loans are age 62 and older, while 57 percent of all individuals who are co-signers are age 55 and older.

The Challenge to Repay Student Loans

The amount of student loan debt is extremely high with some experts estimating that Americans have approximately $1.7 trillion in outstanding student debt. This amount is higher than all other countries combined.

The cost of higher education in the U.S. is greater as well. It is estimated that the average college graduate owes about $30,000 in student loans (California ranks 48th in the U.S. for average student debt). For some, the ability to repay their loans is limited by their ability to obtain a well-paying job. This can be even more difficult for older individuals. Older workers are less likely to be employed due to a number of factors such as age, health, and potential length of service.

In some cases, people suffer setbacks that make it difficult or impossible to repay student loans. As a result, these people may default on their loans. This causes serious difficulties because it may make it increasingly hard to obtain future loans. As a result, the senior citizen could face severe penalties.

If a judgment is entered against them, seniors could have to sell their own property or assets in order to make repayment.

Getting Help in Planning for the Future

According to the Federal Reserve Board Survey of Consumer Finances, the median retirement savings balance for those age 50 to 59 in 2013 was up to $35,000 more for those who didn’t have student loans, between 401(k) and IRA savings.

Indeed, as we continue to live longer, older citizens are among the most vulnerable when it comes to student loans. Anyone with student loan debt problems should consider all available options, but for seniors looking to retire, they can take some steps now to plan for the future:

Pay early. Start repaying your loan as soon as possible to cut down on interest owed — even before the 6-month grace period ends.

Pick the right repayment schedule. The standard is 10 years for many loan providers, and you can change this based on your income or circumstances, but remember: If you default, you lose your ability to switch to a more manageable plan.

Choose deferment or forbearance as needed. If you have a serious illness, for example, you can get your loan payments pushed back — and they don’t accrue interest in the meantime. Note that only federal loans qualify for deferment or forbearance.

Make smart investments. A career path — for yourself or the child or grandchild you’ve co-signed on a student loan for — in public service has big benefits, including loan forgiveness.

Consider all financial options for your family. Make sure to have a long sit-down if you’re covering the expenses of family members by taking out a student loan. What grants and scholarships can they apply for to lessen the overall cost of college? There’s even crowdfunding tricks that we’ve researched to pay for college.

Talk about this early on, when the student starts high school, so you can coach them in their growth during adolescence and be more involved in making good choices and getting them ready for this important next step in their lives. Hopefully, as you get ready for yours.

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