Seniors with Student Debt on the Rise
Seniors Burdened with College Student Debt too
Recent articles in the media have shed new light on the issue of student debt and how such debt is not only affecting young graduates but also seniors who are nearing, or in, retirement. This is a new issue facing seniors that wasn’t a major factor in the past. Today, in addition to trying to save for retirement and planning for fixed-income living in retirement, the number of seniors who also carry college student debt is also on the rise.
The New York Post reports, “Among Americans ages 65 to 74, 4 percent in 2010 carried federal student loan debt, up from 1 percent six years earlier, according to a Government Accountability Office (GAO) report. For all seniors, the collective amount of student loan debt grew from about $2.8 billion in 2005 to about $18.2 billion last year.
The GAO found that about 80 percent of the student loan debt by seniors was for their own education while the rest was taken out for their children. It said federal data showed that seniors were more likely to default on loans for themselves compared with those they took out for their children.
It’s unclear when the loans originated, although the GAO noted that the time period to pay back such debt can range from a decade to 25 years. That means some older Americans could have taken out the loans when they were younger or later in life, such as workers who enrolled in college after a layoff in the midst of the economic downturn.
“As the baby boomers continue to move into retirement, the number of older Americans with defaulted loans will only continue to increase,” the GAO said. “This creates the potential for an unpleasant surprise for some, as their benefits are offset and they face the possibility of a less secure retirement.”
Cited in a Yahoo.com article, Ed Boltz, a bankruptcy attorney in Durham, North Carolina, who is president of the National Association of Consumer Bankruptcy Attorneys, said in an interview that many of the seniors he sees with student loan debt are also struggling with challenges such a medical problems, job loss or divorce. Some, he said, went back to school with hopes of making a higher salary and that didn’t pan out, or the children they helped fund to attend school are not in a position to help the parent in return.
"They are stuck with these debts and they can’t try again," Boltz said. "There's no second act for them."
What’s to be learned from the study is general awareness about taking student loans and how it may impact a person come their senior years. Typically, student loans can’t be discharged in bankruptcy. In addition to docking Social Security, the government can use a variety of tools to recoup student loans, such as docking wages or taking tax refund dollars. This means one should definitely consider and weigh the benefits of accepting a federal student loan, since the long-term debt could cause seniors to have their Social Security benefits docked leaving them with little discretionary income in retirement.
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BLOG Date: Thursday, September 25, 2014
Writer: Ryan Allen