The following is a guest post from Drew Cloud. Drew started the Student Loan Report when he found it difficult to find student loan news and information in one place. In his free time, you can find Drew playing basketball, reading other blogs, or playing with his Great Dane named Rudy.
When we think of student debt, we think of those in their 20s and 30s still paying back their tens of thousands of dollars in student loans. What we don’t think of is the increasing number of baby boomers with student debt. Although tuition hikes have increased more over the past 25 years than the 10 or 15 years before that, baby boomers have met their own set of challenges.
It isn’t that baby boomers are still paying off debt from the ’70s and ’80s. Instead, many went back to college to enter into new career fields. As the world evolves, jobs in some areas have become scarce or nonexistent, resulting in the need for boomers to return to college in order to secure meaningful work. Unfortunately, student loan borrowers in their 60s have a difficult time getting into a repayment plan that works for them. They default, and this results in hostile debt collectors calling them and sending letters.
The Federal Reserve reported that the amount of student debt among those 50 years of age and over grew from 700,000 people in 2005 to 2.8 million people in 2015. This staggering figure shows how student loan debt is putting the financial health of seniors at risk. The amount of debt is growing at a rapid rate among this age group. The Federal Reserve report stated that nearly half of federal student loan borrowers over the age of 65 have defaulted on their loans.
It’s Not Just the Kids
Basically, it’s not just younger college graduates that have accumulated college debt and had difficulty repaying it. The problems plaguing baby boomers are the same ones that the entire borrower population faces. Some of the common problems include:
- Being unable to enter into a federal repayment plan
- Getting released from a cosigned loan
- Lack of information about options
One of the reasons for these problems is that those 65 and older are at a place in their lives where their income is unlikely to increase. They’re living on budgets. The student loan companies can exacerbate the problems by not giving seniors enough information. Once a senior defaults on student loans, his or her Social Security benefits can be garnished by the government to repay the loans. This can cause a dangerous financial issue.
Some seniors have reported that their loan servicers fail to amend their payment plans when they begin to live on a fixed income. This can cause borrowers to default. When they default, they lose some of their Social Security benefits. In some cases, errors by debt collectors mean that a person can’t use the federal programs that will get them out of default so they can put a stop to the loss of their Social Security benefits.
Nonetheless, the CFPB says that it is likely that many defaulted borrowers qualify for repayment programs that would bring them current and with payments that are very minimal. A representative for the CFPB said that there is an obvious failure when the most vulnerable of the American population are having their Social Security benefits garnished when there are more options available.
Cosigning Baby Boomers
The good news for baby boomers that have cosigned loans for their children is that they don’t have to worry about their Social Security benefits being garnished if the borrower defaults. However, seniors that have cosigned loans have said that debt collectors have threatened Social Security garnishment as a way to get them to pay the debt.
Baby boomers that have cosigned student loans have said that private lenders won’t give them information on loans. This is pretty alarming, especially since many private lenders encourage the use of a cosigner for options such as refinancing and private education loans. In some cases, lenders would take cosigner payments and apply them to other loans held by the primary borrower, causing the cosigner’s payment to appear inadequate. While some private lenders offer a cosigner release form, many do not address this possibility. Read up on the basics! For cosigning parents, more information on private lenders who offer cosigner release through refinancing can be found at The Student Loan Report.
The issues cosigners are facing have been on the rise over the past few years because private lenders are requiring parents to be responsible if their college-age child takes out a student loan. Parents are taking on more federal student debt through Parent Plus loans. Many parents have done this while paying off their own student debt, resulting in them paying two different sets of student loan debt.
When unable to pay the debt, allowing it to go into default, parents could be pushed into poverty because of Social Security garnishment. It is possible to be garnished below the poverty line, as it happened to over 67,000 people in 2015, according to a report by the Government Accountability Office.
Getting Help When You Need It
If you are at a vulnerable stage in your life, you can reach out to your loan servicer and demand that you are given the information you need. Now that you know that there are ways that you can get help, especially when your income has decreased, you can be aggressive in your demand for a solution.