Student Loan Debt Not Just a Problem for The Young
Most of the attention on the 1.2 trillion-dollar student loan debt crisis falls on Millennials and the impact their high balances have on other life events such as buying a home or starting a family. However, the fastest growing segment of student loans are among those 60 and over, which has seen debt balances quadruple from 2005 to 2015. The average debt load for those 60 and above grew to $23,500, leading to higher default rates and five times the number of seniors losing Social Security money to student loan garnishments. In 2012, 12.5% of those over 60 had issues with a defaulting student loan. The number rises to 40% for those over 65.
While many elderly took out debt to pay for their own education, 73% of seniors with current student loan balances accepted responsibility for personal or co-signed loans for children or grandchildren. The bigger challenge is that most of these same people still carry mortgages (63%), credit card debt (67%) and car loans (45%), driving down financial security in retirement.
What You Need to Know About Student Loan Debt for the Elderly
Income-driven repayment plans can be a source of financial relief for those with student loans. To move to the income-based option, you fill out an application and submit tax returns to calculate a new payment. Sometimes you can have no payment depending on household income. Interest continues to accrue on the account, but heirs are not responsible for debt remaining in your name. To stay on the plan, you must re-apply every year.
Correcting loans in default. Only Federal student loans permit garnishment of Social Security wages. To stop a garnishment, you may catch up the defaulted loan and transfer to an income-based repayment plan.