When you hear about someone working hard to pay off a student loan, it’s natural to assume that the person is in their 20s or 30s.
However, as the cost of going to college steadily rises, it’s becoming more and more difficult for people to afford school.
Qualifying for loans has also become more difficult. Many lenders require a co-signer or co-borrower.
Because of this, a large number of young adults who want to go to college have turned to their parents and grandparents for student loan help.
This has left many older Americans in student loan debt.
According to a report, the majority of older borrowers – a whopping 73% – took out student loans to finance their children’s and grandchildren’s education.
Getting student loan help from parents or grandparents is a gamble.
Older Americans are often not in the best position to pay back student loans.
Of the 867,000 borrowers who are over the age of 65, approximately 210,000 of them owe loans under the Parent PLUS Loan program.
This program is the only federal program that offers student loan help by allowing parents or grandparents to borrow for the undergraduate education of their kids or grandkids.
The tough part is figuring out how they’re going to pay this money back.
And even if the agreement is that the loan will be paid back by the children or grandchildren, just a couple of missed payments can directly affect the parent’s or grandparent’s credit score.
So what’s going on?
As we said earlier, many lenders – particularly private student loans – require students to apply jointly with a co-signer or co-borrower. And the report shows that more than half of the co-signers are over 55.
From 2005 to 2015, the number of Americans over the age 60 with at least one student loan quadrupled from about 700,000 to 2.8 million. And the share of all student loan borrowers that age jumped from 2.7% to 6.4% – more than double.
What’s even more alarming is how much the average amount owed has also increased.
In 2005, the average amount owed by borrowers 60 and older was around $12,000. Just ten years later in 2015, it had nearly doubled at more than $23,000.
It’s a crisis for older Americans trying to pay back student loans.
Many of the older student loan borrowers say they forgo basic health care needs such as prescription medicines, doctors’ visits and dental care. The report shows they do this more often than those without student loans.
Plus, student loans are one of the few exceptions to rules that protect federal benefits from being garnished, so some of these older student loan borrowers are also losing part of their Social Security benefits due to unpaid federal student loans.
And since Social Security is the only source of income for nearly three-quarters of people over the age of 65, those “benefit offsets may impose serious financial hardship for many of the affected older borrowers,” the report states.
But student loan debt isn’t the only burden.
To add to their stress, older borrowers are often treated – or rather, mistreated – by loan servicers and debt collectors.
It would be nice if there could be some forgiveness to those who were selfless enough to offer student loan help to their families.
But according to the report, some older consumers who are having trouble paying on their loans experience problems with servicers and debt collectors. Let’s just say they are less than respectful.
This only adds to their financial distress.
About 1,100 student loan complaints and 500 debt collection complaints have gone through the CFPB by consumers age 62 and older.
There are ways to ease some of the stress.
If a person over the age of 62 is struggling with making federal student loan payments, the first thing the CFPB recommends is to see if they can qualify for a payment plan that cuts costs.
For instance, if an older person’s income drops after retirement but they still have a federal student loan, they can apply for an income-driven repayment plan.
This can help to reduce payments or possibly put them on hold.
The author of the report gives the following example:
“Consider the case of a retiree whose income is limited to only her $1,165 monthly Social Security check, which is the median Social Security benefit for an older consumer that depends on Social Security for all of her income. If this retiree has defaulted on a federal student loan, the government can deduct or ‘offset’ $60 from her monthly Social Security benefit, reducing her annual income to $13,240.”
However, by rehabilitating or consolidating her defaulted student loans, this same borrower would no longer be subject to the Social Security offset and would also become eligible for an income-driven repayment plan. Given her low income, the [income-driven repayment] payment formula would set her monthly payment amount to $0.”
More details are available at the Department of Education’s Federal Student Aid website. Additional information about repayment options can be found on the CFPB’s website with the Repay Student Debt tool.
The advice for private loans is not as cut and dry.
In this case, it’s on the lenders.
The CFPB suggests that lenders should provide better and more information to students, parents and grandparents who are seeking student loan help.
“Prospective cosigners would benefit from lenders and school financial aid officials providing counseling and/or effective information and communication regarding the liability that a co-signer undertakes,” it says.
But since the CFPB doesn’t suggest federal regulation to oversee these practices, borrowers are still at the mercy of the lender.
This does not mean being harassed by a student loan debt collector or servicer is okay, however. If this is the case, then older consumers can file a complaint with the CFPB online.
The agency will then contact the company on their behalf.
In its six years of existence, the CFPB has handled more than half a million cases and with impressive results.
The CFPB’s future is sketchy though. Some financial analysts expect the Trump Administration to try to either weaken it or get rid of it altogether.
But for now, the CFPB is a resource for older Americans who owe on student loans.
If you have any other advice for older Americans struggling with student loan debt, please share your wisdom. It could change someone’s life.