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Why Senior Student Loan Debt Is More Complicated

Sarah Stevenson
By Sarah StevensonMay 6, 2013
Senior Student Loan Debt

With more sources of debt and fewer repayment options, seniors are now the fastest-growing age group for student loan debt.

Senior Student Loan DebtWe’ve all heard about the dire straits today’s college students face upon graduation: tens of thousands of dollars in student loan debt that they may never be able to fully repay. But what about senior citizens? The truth is, Americans aged 60 and over are in a financial situation just as alarming.

According to the Federal Reserve Bank of New York, by the end of 2012 older Americans owed a staggering $43 billion in college debt, making them the fastest-growing age group for student loan debt. Even more frightening, 12.5 percent of those indebted seniors are 90 days delinquent or more. Why are our parents saddled with so much education debt they can’t pay back? Current students, of course, can blame rising tuition and fewer job opportunities, but for seniors, the answer is more complex.

Seniors Have More Sources of Student Loan Debt

In an article on Yahoo! Finance, Mark Kantrowitz, publisher of FinAid.org, cites some common sources of education debt for seniors: student loan debt from decades ago, more recent college loan debt (for those who went back to school), and college debt co-signed or borrowed on behalf of a child or grandchild.

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Many experts agree that the biggest culprit for senior student loan debt is that last one — debts our parents took on later in life to help us, or our children, afford the constantly increasing cost of a college education. Add to that the fact that many seniors have their own student loan burden to shoulder, and may still be suffering from the financial hardships of the recent recession, and you’ve got a group that is in serious economic trouble. A recent New York Times article even referred to “boomerang moms”— parents whose debt is so crippling that they must move in with their own children.

Debt Repayment Options Are More Limited for Seniors

Another issue adding to seniors’ debt difficulties is the fact that repayment options are not nearly as flexible, financial hardship is hard to prove, and bankruptcy options are extremely limited for student loan debt. Income-based repayment plans may be a good option for federal loans, but they are not available for Parent PLUS loans or private loans. Other types of repayment plans can be riddled with restrictions; or, if they do lower your monthly payments, they result in you paying more over the long term.

The Repercussions of Senior Debt

After looking more closely at seniors’ education debt crisis, it’s no wonder so many people owe so much money, and so many are delinquent on their payments. But that’s still not the worst of it. For seniors in deep debt or delinquency, even more weight gets piled onto their financial burden. Delinquent borrowers who owe federal loans may find themselves on the hook for extra thousands of dollars in penalties and interest years down the line. Seniors may have to dip into their retirement savings to pay off student loans, or work for years longer than they expected to, reports the AARP.

Having delinquent loans, of course, can ruin credit and result in garnished wages and tax refunds — but sometimes seniors have no choice. And in the case of delinquent federal loans, a new horror can pop up: garnishment of Social Security income to offset student loan debt. As of last September, the New York Times reported, nearly 119,000 retired Americans were forfeiting part of their Social Security payments to the government for unpaid education debt. Sometimes the final result, even after years of faithfully trying to repay loans, is bankruptcy.

With student loan interest rates back on the table for Congressional discussion this year, all anyone can hope for — whether they’re current college students or seniors in debt — is some sort of improvement to current loan legislation.

Are your parents suffering from staggering senior student loan debt? Has the rising cost of tuition meant more private and PLUS loans for your family? How do you plan to stay on top of education debt? Let us know in the comments.

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Sarah Stevenson
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Sarah Stevenson

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