Today’s college students are taking on student loan debt in staggering amounts. The financial impediments that this debt is likely to cause later in life have become clear: building financial assets, like an emergency fund, owning a house, or saving for retirement, are put on hold in order to chip away at a mountain of debt. But a recent report from the Consumer Financial Protection Bureau (CFPB) shows that younger Americans aren’t the only demographic being weighed down by the burden of student loans.
“It is alarming that older Americans are the fastest growing segment of student loan borrowers,” said CFPB director Richard Cordray. “Many of these older Americans are helping to finance their children’s or grandchildren’s education while living on a fixed income. We are concerned that student loans are contributing to financial insecurity for many older Americans and that student loan servicing problems can add to their distress.”
According to the report, the number of older Americans with student loan debt quadrupled between 2005 and 2015. As of 2015, more than 2.8 million Americans over 60 had outstanding student loan debt, owing an estimated $66.7 billion. And they aren’t having an easy time managing the heavy financial load either. The financial difficulties that older Americans with student loan debt have become increasingly clear:
- Late and missed payments by older borrowers increased from 7.4 percent in 2005 to 12.5 percent in 2012.
- Nearly 40 percent of federal student loan borrowers age 65 and older are in default.
- A growing number of older borrowers have had their Social Security benefits offset as a result of unpaid student loans.
- A large proportion of older student loan borrowers struggle to afford basic needs.
Survey after survey has hinted at this reality, particularly when Americans are asked whether they’re saving enough for retirement or if they have an emergency savings. Our own Annual Savings Survey released during America Saves Week 2017 revealed that only 38 percent of households reported good or excellent progress in meeting their savings needs, with over a quarter indicating no progress at all.
Fortunately, there are some tips available to older student loan borrowers who are either worried that they might find themselves in distress soon, or already are:
- Know the numbers. Those who have cosigned or taken on loans for their children or grandchildren can ask the loan servicer to see the account information or learn the outstanding balance. This is particularly beneficial for cosigners who assumed that they were off the hook when the borrower graduated and landed a job. In either case, knowing the numbers can help inform them of their choices, including repayment options.
- Seek out qualifying payment plans. Income-based repayment plans could seriously reduce monthly payments, or possibly suspend them. Whether they are currently struggling or planning ahead for an income drop (perhaps tied to retirement), an adjustment to the payment plan could help avoid any late payments or defaults on the loans. Visit the Department of Education’s Federal Student Aid website for more details. The CFPB’s Repay Student Debt tool also has useful information about repayment options.
- File complaints for any harassment or servicing problems/errors related to repayment. Older Americans have already reported numerous complaints related to federal student loan services and student loan debt collection, and it’s clear that more work needs to be done in this area. Thirty-six percent of complaints in recent years were related to continued attempts to collect debt not owed and 24 percent were related to communications tactics. Older borrowers experienced servicing roadblocks and processing errors that limited their ability to enroll in income-driven repayment plans. Older cosigners complained about servicers misallocating their payments.No matter what the issue may be, the CFPB is there to help.