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Seniors and Student Debt: A Growing Issue

The student debt crisis is often one considered to only be facing millennials, but they aren’t alone. While the majority certainly are young adults, a growing number of seniors are being crippled by student debt as well. The college debt crisis has ballooned to over $1.5 trillion and continues to grow. This increase is despite a lack of growth in new student loans for the same age group.

Many seniors look at their retirement, or Medicare-age years, as a time to kick back and relax, but if you’re trying to stay on top of student debts, your options may be limited. With student debt relief being one of the hot topics of discussion right now, it’s important to remember that not all who need relief are fresh-faced students heading off to college for the first time. Some are seniors with PhDs getting ready to retire after a lifetime of hard work. Others are carrying student debts from decades ago. Some haven’t even attended college but cosigned for a loved one. So, what does this debt crisis mean for the millions of seniors who struggle with student debt?

What’s Happening with Senior Student Debt?

In only a year, specifically in 2017, the student loan burden on seniors aged 60 and up has risen from $67 billion to over $86 billion. This comes to roughly $33,800 in student debt on average per senior who borrowed money to pay for schooling. It also represents a staggering 161 percent rise from 2010. Keep in mind, these debt numbers don’t include any interest rates that the loans may have, which can further expand that number as the debt amount grows.

In only a year, the student loan burden on seniors rose from $67 billion to over $86 billion.

What becomes even more worrisome is the effect that these debts have on the lives of the seniors who’ve been burdened with them. With many seniors nearing or entering retirement without any savings, the impediment that student debt can create can be devasting. There also remains the risk that you can’t keep up with said loans and fall into default — the fate of almost 40 percent of student-loan-borrowers age 65 and older. In these cases, the federal government can even garnish your wages or money from your Social Security checks to make up for these payments. Luckily, they can never garnish more than 15 percent of your Social Security income, and can never lower your Social Security check below $750. Regardless, losing even 15 percent of one of your income streams can make a sizable difference to your budget.

Why are Student Costs Growing?

So, why are these costs growing so rapidly? Well, there are a few different answers to that. First, the cost of higher education is simply growing at an increasing rate. As it becomes more expensive to attend school, the debt that you take on grows as well. While this is certainly a straightforward reason, it’s by no means the only one.

Another reason for the growth in student debt is due to the 2008 financial crisis, when many older Americans returned to school to improve their attractiveness to potential employers. This meant taking on new levels of debt later in life. With less time to pay these loans off, these debts can continue into retirement or force older seniors to put off retirement. After all, student loans represent a sizable monthly expenditure for many and can make funding your retirement difficult.

Some seniors get themselves into student debt without ever attending a university.

Some seniors get themselves into student debt without ever attending a university. Many of these stats also include parents who’ve taken on the student loan burden or cosigned for loans for their children, which (together with other sources of senior student debt) added up to $89 billion in 2019. In some cases, like with the federal Parent PLUS Loan, loans can’t be transferred to the student after graduation.

Finally, there’s a sneaky way that the debt can pile up even as you work to repay it. Many seniors utilize the repayment option called an income-driven repayment (IDR) plan. The IDR plan looks at an individual’s income, along with a spouse’s income, to find an affordable monthly payment schedule. As your income grows, so does the payment. For many seniors on a fixed income, this can mean little to no monthly payment on the student loans. This sounds great, until you realize that the interest isn’t reduced. So, while your monthly payment may be affordable, it may not cover that month’s interest growth, putting you more in the hole than you were before.

Can I Get Help?

If you’re a senior struggling with student debt, know that you’re not alone. There are ways you can find relief. Unfortunately, if you’re retired with student loans, it may be necessary to find new work, like a part-time job. This can help make up for some of the money you’d be losing paying off the loans. But, there are ways you can help yourself beyond just chipping away at the debt.

For example, if you have debt from a Parent PLUS loan, there are ways to move the loan to the student post-graduation, which wouldn’t be considered transferring it. Specifically, you need to refinance the loan in the student’s name, which has them take on the remainder of the loan from that point onward.

While there are risks to a IDR plan, it can lower your monthly payment to an affordable range.

If you’re one of the 40 percent of seniors defaulting on student loans, the aforementioned IDR plan may be right for you. While there are risks, it can lower your monthly payment to a range that you can afford, allowing you to pull yourself out of default. Just make sure that your monthly payment is at least a little more than the interest payment, so the loan isn’t actively growing. You can also discuss loan rehabilitation with the Department of Education, which works out an affordable and practical path to repayment. Additionally, you can look to consolidate your loans, which may reduce your monthly payments or even lower your interest rate.

You can also look to consolidate your loans, which may reduce your monthly payments or even lower your interest rate.

Finally, you could try applying for loan forgiveness, cancellation, or discharge, which removes the debt obligation. There are several reasons why this may be granted. One applicable reason is total and permanent disability, which relieves you from all types of federal student loans. An additional reason is financial hardship, specifically if you declare bankruptcy and the loan represents undo hardship. You may also request a payment reduction due to financial hardship, however this is up to the Department of Education to approve. These are only a few examples of ways to find relief from student loans, but there are many other solutions.

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As seniors returning to higher education becomes more of the new normal, the senior student debt issue will also likely grow. While this section of the population may not be as large as youth attending college for the first time, seniors are also faced with unique challenges. For this reason, an awareness of the problem and ways to relieve the burden, at least on an individual level, becomes important. In the wider context of the debate over how to handle the national student debt crisis, it’s also important to remember that millennials aren’t the only section of the population that is deeply affected.

Further Reading

Consumer Financial Protection Bureau — Snapshot of older consumers and student loan debt