The Student Loan Crisis of Older Americans
People 60+ are the fastest growing segment of the student loan market
We naturally think that it’s Millennials who are struggling with student loan payments. Turns out, many of their boomer parents are, too.
In fact, according to a report from the federal Consumer Financial Protection Bureau (CFPB), older Americans now carry an “unprecedented amount of student loan debt into retirement.” In 2015, the CFPB says, older consumers owed an estimated $66.7 billion in student loans. Nearly 867,000 borrowers 65 and older owed federal student loans in 2015.
Eye-Popping Stats on Older Student Loan Borrowers
A few more eye-poppers from the CFPB: From 2005 to 2015, the number of Americans age 60 or older with one or more student loans quadrupled from about 700,000 to 2.8 million; the share of all student loan borrowers that age more than doubled from 2.7 percent to 6.4 percent and their average debt load roughly doubled, from $12,100 to $23,500.
“It is alarming that older Americans [age 60+] are the fastest growing segment of student loan borrowers,” said CFPB director Richard Cordray. “We are concerned that student loans are contributing to financial insecurity for many older Americans.”
A Tale of Two Crises
He’s not the only one concerned. Consumer Reports attorney Suzanne Martindale just noted in a Consumer Reports article the CFPB report makes clear that “the education debt crisis and the retirement crisis in this country are very closely linked.”
A growing number of the older borrowers are struggling to make the loan payments, often due to reduced incomes in retirement or just before retiring. “Older consumers with outstanding student loans are more likely than those without outstanding student loans to report that they have skipped necessary health care needs such as prescription medicines, doctors’ visits and dental care because they could not afford it,” the CFPB report said.
According to the report, in 2015, 37 percent of federal student loan borrowers age 65 and older were in default (only 17 percent of federal student loan borrowers age 49 and under were). And the proportion of delinquent student loan debt held by borrowers age 60 and older soared from 7.4 percent in 2005 to 12.5 percent in 2012.
A growing number of federal student loan borrowers age 65+ also had their Social Security benefits offset because of unpaid student loans — 8,700 in 2005 and 40,000 in 2015.
No Way to Treat a Borrower
But it’s not just the amount of student loan debt that’s making life rough for many older Americans. It’s the way the borrowers are often treated — or rather, mistreated — by loan servicers and debt collectors.
“Some consumers who are delinquent or in default on their loans experience problems with servicers and debt collectors that exacerbate their financial distress,” the report said. Consumers 62 and older have submitted to the agency about 1,100 student loan complaints and 500 debt collection complaints related to student loans.
The Big Surprise About Their Loans
If you think all this student loan debt is a holdover from the boomers’ college years, think again.
The vast majority of the older borrowers (73 percent) took out student loans to finance their children’s and grandchildren’s education. About 210,000 of the 867,000 borrowers who are 65+ owe loans under the Parent PLUS Loan program (current rate: 6.31 percent), the only federal program that lets parents borrow for the undergraduate education of their kids.
The parents either took out student loans directly or as co-signers with their kids as the primary borrowers. Private student loan lenders, the CFPB noted, routinely require a student jointly apply for a loan with a co-signer.
And, as personal finance expert Nick Clements pointed out on Next Avenue, being a co-signer can be a risky proposition. If your child misses a payment, your credit could take a hit. According to the Federal Trade Commission, Clements said, three out of four co-signers end up having to pay something on co-signed loans because the primary borrower fails to make payments on time.
Advice for Older Student Loan Borrowers
A few tips for older student loan borrowers in distress or worried they may be soon:
If you’ve co-signed your child or grandchild’s student loan, you can ask the servicer to see account information so you can pay off the loan or learn the outstanding balance, says the CFPB.
If you’re struggling with making federal student loan payments, the CFPB says, see if you can qualify for a payment plan that could cut your costs. For instance, if you retire and your income drops substantially and have a federal student loan, you can apply for an income-driven repayment plan. That could reduce your payments or possibly suspend them. The Department of Education’s Federal Student Aid website has more details. And the CFPB’s Repay Student Debt tool on its site has useful information about repayment options.
And if you’re being harassed by a student loan debt collector or servicer, file a complaint with the CFPB online. The agency can then contact the company on your behalf.
The CFPB: Recent Success, Cloudy Future
The CFPB, which has handled more than half a million cases during its six year existence, has an impressive history of getting results. A few months back, the agency forced Wells Fargo to pay $100 million because the bank set up millions of fraudulent accounts. The CFPB has also returned $11.7 billion to more than 27 million consumers from other companies. And its complaint database has processed more than 1 million complaints.
The CFPB’s future, however, is cloudy. Some financial analysts expect the Trump Administration to try to either dismantle it or make its teeth less sharp.
