It’s hard enough paying off college loans off your wages. It doesn’t get any easier when you retire.
The fastest growing portion of the US student loan stack of $ 1.7 trillion is held by the oldest borrowers. There are now about 8.7 million Americans over 50 still paying off college loans, and their debt has increased by about half since 2017.
Some took out loans to help their children and could be well over 90 before they finish repayments. Others went back to school later in life. In both cases, borrowers were burdened with high interest rates that inflated their balances.
“The interest has come on in a big way,” says Alma Topete, 60, who borrowed about $ 30,000 and now owes $ 70,000. “I never expected to have to take out a loan at that age.”
Therefore, the impending resumption of student loan payments is a cross-generational challenge. A pandemic moratorium is set to expire at the end of September, and no progress has been made so far on debt relief, which President Joe Biden promised in the election campaign.
Student loans shouldn’t become a lifelong burden. The US higher education system, which relies more on individual credit than global peers, is based on the idea that graduates can settle debts relatively early in their working lives. Most loans come with a 10-year repayment plan that is one-third the length of a typical mortgage.
But the reality is very different for many borrowers. Frank Sizer Jr., who is 77 years old, estimates he has almost two decades more payments to go. Sizer, a former prison guard, borrowed money to help his son study biology at Bridgewater College in Virginia. He retired in 2010 – two years after his son graduated – and currently owes about $ 52,000.
“God knows what the original amount was,” he says. “It just kept growing.” He expected to have paid it off before retirement, and it just got tougher to find the $ 500 monthly loan payments because “you don’t have the income you had when you worked.”
One reason parents of borrowers like Sizer often find their loan balances swell is because they pay higher interest rates.
Since mid-2006, state loans under the Parent PLUS program have been charged an average of 466 basis points over US Treasuries, well above the typical interest rate for student borrowers. And parenting loans also come with a high one-time commitment fee. The current interest rate is 4.23% of the total – about four times what students typically charge.
It’s not just parental borrowers who suffer from rising loan balances late in life.
For many older Americans, a smooth career path that would have enabled them to repay loans on schedule has proven to be unattainable – especially in the job market, which has often been difficult since the 2008 financial crisis. Some went back to school to regain new skills and instead had to take on new debts.
Unlike many types of debt, there is no way out of the student loan due to bankruptcy. Nationwide supported people are excusable in death, so that they are not passed on to loved ones.
Retirees who still owe money can deduct loan repayments from their Social Security income. In fiscal 2019, the last full fiscal year before the pandemic freeze, the Department of Education received $ 4.9 billion back from benefits due under government programs.
That has helped make student debt a talking point in retirement homes and college bars.