When someone mentions the student loan crisis, most people automatically think of the school debt that millennials have racked up. What most people don’t know, or care to mention, is that baby boomers and seniors are also struggling to make those loan payments.
A new report gives some harrowing insight into what is quickly becoming a major retirement issue for seniors across the nation. Let’s take a look at why the student loan crisis is an older American issue too, and explore some strategies to combat it.
Seniors with Student Debt: A Study
The Consumer Financial Protection Bureau (CFPB) released a study about the student loan debt of older adults. According to the report, older Americans carry an “unprecedented amount of student loan debt into retirement.” Older Americans are now the fastest-growing group of student loan borrowers.
Over the last decade, the average amount of debt taken on by an individual has nearly doubled from $12,000 to $23,500. In 2015, around 867,000 consumers aged 65 and older owed an estimated $66.7 billion in federal student loans. The first question you ask after learning these statistics is, why? Why are so many seniors being affected by the student loan crisis?
Why the Student Loan Crisis Affects Older Americans
According to the CFPB study, about 75 percent of older borrowers took out loans in order to help pay for a family member’s college expenses. This is due to the rising cost of education, which forces families to take on more debt. Cuts in public funding also contribute to increasing tuition rates.
There is a federal aid for students but most of it comes in loans, not grants. Those federal loans may still need to be further supplemented by borrowing from private lenders. These private lenders do fill the gap for those needing funds, but they do so with high-interest loans. Because of this, grandma or grandpa might think it’s a better idea to take the loans out themselves.
When the Retirement and Student Loan Crisis Collide
What grandma and grandpa fail to see is that these student loans could later contribute to financial insecurity. Many older Americans live on fixed incomes with other debts that have to be paid during retirement. They may have a mortgage, credit card debt, and auto payment, and more.
The reason why this is such a big deal is because older adults that have outstanding loans are more like to skip necessary healthcare needs. They may skip on doctor’s appointments, dental care, or prescriptions because they can’t afford medical care while paying off their loans.
Even more upsetting is that Social Security benefits can be offset if you owe federal student loans. This happened to 8,700 adults 65 and older in 2005, and a whopping 40,000 in 2015. This is a major issue because the nation is in the middle of a retirement crisis. Fewer seniors have traditional pensions. Older adults are relying on Social Security benefits and carrying heavy amounts of debt. More seniors are struggling to afford the care they currently need or will need in the future.
If You’re an Older Adult Caught in the Student Loan Crisis:
Older Americans have the same student loan issues that are facing younger borrowers. They are having difficulty getting loan information, they have difficulty finding an affordable repayment plan, and/or they collect massive late fees. If you are an older adult struggling to pay back federal student loans, you are not alone.
Here are four ways that you can you can help yourself if you are struggling (or even if you are not):
1. Seek lower repayment plan
Has your income changed since you first started paying off your student debt? If you have retired or lost your job, you may be eligible for an income-based repayment plan. Lenders will create a plan so that you can pay off some of your debt, but still, afford other things.
2. Protect your Social Security
If you have private loans, debt collectors usually cannot take federal benefits to repay that loan. If you have federal loans, the government does have a right to collect its loans by taking part of your Social Security. If you have low-income or a disability, you may be able to get the repayment reduced or waived. You should visit the Department of Education’s Federal Student Aid site for more information.
3. Understand your responsibilities as a co-signer
Make sure that before you decide to co-sign on your grandson’s college loan that you fully understand the terms of the loan. If he isn’t able to repay the loan (or simply won’t), there is a great chance you will be left responsible.
Also, remember that as a co-signer of a loan, you have the right to request information about the loan. This will allow you to see if the primary borrower is keeping up with their payments before it affects your credit.
4. File a complaint
If you experience any issues with not being able to lower a payment or your Social Security is affected, you should file a complaint with the CFPB. You can also file a complaint with them if student loan debt collectors are harassing you.