After College: If You’re Older and Paying on College Loans, You’re Not Alone. And You Have Options!

The nation’s $1.5 trillion in outstanding student loan debt is increasingly affecting older Americans, and not for the better.

The Consumer Finance Protection Bureau (CFPB) recently found that the numbers of people aged 60 and over owing on college loans quadrupled in a decade. Their average educational debt rose from $12,100 to $23,500 during that period.

A $23,500 debt generates monthly payments that can reach $490. This significantly reduces what aging Americans have to spend on basic necessities, including healthcare. It also cuts into what they can save for retirement.

These problems are compounded by the automobile, credit card, mortgage, and other debts many older borrowers are repaying. Bankruptcy courts, however, hardly ever discharge student loan debts.

Fifty and 60 year olds amass these debts by helping children and grandchildren pay for school or by cosigning — pledging to repay if their students don’t — private loans. Only 27% borrow for themselves.

Not surprisingly, many older borrowers struggle to repay educational loans. The CFPB found that 12% were behind on such payments, negatively affecting their credit scores.

Among federal student loan borrowers aged 65 and over, 37% were in default. The government has the legal right to garnish (confiscate) their social security benefits to repay their defaults. Social security is the only regular source of retirement income for 69% of Americans aged 65 and over, so this is particularly alarming.

Delinquent and defaulted borrowers are also subject to aggressive, hostile, even threatening collection calls and letters. As one expert put it, “A student loan can be a debt that’s kind of like a ball and chain that you . . . drag to the grave.”

How to avoid these problems? If you’re a precollege parent, implement a College Finance Plan. This’ll help your children cut the cost of a quality postsecondary education by, for example, completing college level classes in high school, getting grants, and winning scholarships. It’ll also help you maximize savings and financial resources other than debt to pay that price.

If you and your student must borrow for college, use the Federal Direct Loan Program’s (FDLP’s) student and/or parent PLUS loans. If either of you ever considers private student loans, research and compare them (see here and here) beforehand.

Carefully select your loan repayment plan. Different plans require different monthly payment amounts. In the FDLP, some also lead to loan forgiveness. You can also reduce monthly payments temporarily through forbearance or permanently through consolidation, which is generally better for federal loans than refinancing them.

Finally, FDLP loans offer three pathways for getting out of default. Explore them here.

Owing on college loans late in life need not be a crisis. Check your options. Then pursue what works best for you!

Contact College Affordability Solutions if you’re looking for strategies to better manage your college loan debts. There is no charge for consulting with it on this or other issues related to paying for postsecondary education.

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