2.8 Million Seniors Have College Debt
The number of Americans over age 60 who are paying back federal or private student loans has reached a critical mass, quadrupling to 2.8 million over the past decade, a new report finds.
These older borrowers owe $23,500, on average, and two-thirds of them also have mortgages and credit card bills at a time their medical expenses are typically increasing, according to the report issued this month by the Consumer Financial Protection Bureau (CFPB). Separately, nearly 40 percent of those with federal loans have defaulted on their payments.
The response of many older student loan borrowers, the CFPB said, is to “skip necessary health care needs such as prescription medicines, doctor’s visits, and dental care because they could not afford it.”
Suzanne Martindale, a staff attorney at Consumer Reports, said CFPB’s report illuminates the link between the country’s college debt crisis and the retirement crisis.
Indeed, more than 2 million of the 2.8 million older borrowers took out loans to pay for their children’s or grandchildren’s educations, CFPB said. Relatively few owe money for their own or a spouse’s education, which was typically obtained when college was still affordable for a middle-class family.
The federal government garnishes the Social Security payments of those in default on federal student loans. About 115,000 people over age 50 are having their Social Security old age, disability, or survivor benefits reduced to pay off loans, according to a Government Accountability Office (GAO) report last month cited by CFPB. Half of the reductions in Social Security benefits were the maximum allowed, or 15 percent of benefits. Most of the defaulted federal loans were taken out to pay for their own – and not an offspring’s – education, CFPB said.
When older people co-sign private student loans, other problems arise. More than half of all co-signers nationwide are now over age 55, the agency reported. With the private loans come the now-familiar complaints about servicing problems. These include improperly allocating older people’s payments that should be going toward their own loans to the former students’ separate loan balances. Other problems are a failure to provide older borrowers with loan and payment information they have a right to know and aggressive debt collection practices, the CFPB said.
The servicing problems also “exacerbate older borrowers’ financial distress,” the CFPB said.
The CFPB’s rather dry accounting of one aspect of the student loan crisis indicates more trouble swirling below the surface for growing numbers of retirees.
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