Seniors stuck with student loans: Problems and prospects
June 1, 2021 | View PDF
Are you a senior chafing under the debt burden of a student loan? It may be perversely comforting to know that you are not alone. According to the U.S. Government Accountability Office (GAO), in 2015, nearly 870,000 borrowers age 65 and older were burdened by federal student loans. Certainly the numbers are even higher now. Moreover, the amounts of money involved are staggering. According to AARP, in 2004, adults age 50 and older owed $47 billion in student loan debt. By 2018, that figure had exploded to $289.5 billion, making it one of the biggest contributors to the rise in the amount of debt seniors owe in general. So, what happened?
The Office for Older Americans, and the Office for Students and Young Consumers studied this emerging problem a few years ago and released a major report in 2017, “Snapshot of older consumers and student loan debt.” Here’s what they found:
“Unlike federal student loans, private student loan lenders routinely require that a student jointly apply for a loan with a co-signer or co-borrower. Loan co-signers or co-borrowers are held responsible for repaying the loan along with the primary borrower. Student borrowers often turn to their parents and grandparents to co-sign their private student loans. The Bureau estimates that 27 percent of individuals who are co-signers on one or more outstanding student loans are age 62 and older, and 57 percent of all individuals who are co-signers are age 55 and older.”
In addition, researchers made this astounding finding: nearly 40 percent of federal student loan borrowers age 65 and older are in default, often with draconian consequences. For example:
“Every year, the federal government shoves tens of thousands of seniors into poverty or near-poverty by garnishing Social Security benefits to make up what is owed in student loan payments, undermining one of the nation’s most successful anti-poverty programs. In 2015, the federal government garnished the Social Security checks of almost 114,000 Americans.”
Pretty scary, but it doesn’t end there. For the most part, this type of debt cannot be resolved by filing for bankruptcy. Consequently, being in default can also result in:
sacrificed retirement savings
delay in healthcare
being forced to work beyond retirement
impaired ability to obtain loans to buy a house or car, or for other purposes
inability to financially help friends and family
Now gird your loins for a flood of good news. Hard to believe, but “help is on the way.” According to an excellent article from Investopedia published on their website April 22, 2021, entitled “How to Get COVID-19 Student Loan Relief,” the main points are:
“Borrowers with loans owned by the U.S. Department of Education or through the Federal Family Education Loan (FFEL) Program automatically receive a new interest rate of 0% from March 13, 2020, through Sept. 31, 2021. No payments are required during this time.
“If you’re behind on a loan owned by the Department of Education, your wages, tax refund and Social Security payments can’t be garnished and debt collectors can’t bother you right now.
“Some federal loans are not owned by the Department of Education but by commercial lenders. Borrowers who need relief on these loans—or on private student loans—can still get it, but they’ll have to request it, and it won’t be as generous.”
See the full article, readily available on the internet, for details. And there’s more. President Biden has asked the Education Secretary to prepare a memo on the President’s legal authority to wipe out as much as $50,000 each for all student loans. The pundits tell us we should know the details come June or July. It is not a sure thing, but the chances look better than they have in a very long time.
Finally, if you are pondering the question of signing or cosigning for a new student loan, take a look at the AARP article from February 10, 2021, “Should Seniors Take Out Student Loans to Learn New Skills?” The article provides a systematic and detailed series of discussion points to help you determine if that is a good idea or not.
No question about it, these are difficult times. But this issue seems to be on the way to at least partial resolution for many thousands of seniors across Alaska and the lower-48.
Lawrence D. Weiss is a UAA Professor of Public Health, Emeritus, creator of the UAA Master of Public Health program, and author of several books and numerous articles.