Student loan debt is no longer just a concern for those in their 20s and 30s. Older individuals have student loans too. Seniors now have the highest rate of student loan debt. TransUnion, a credit reporting firm, recently released data showing student loan debt rose 161% for those 60 and older from 2010 to 2017. This is higher than the debt for new graduates.
Managing student loans after age 60 can be difficult. The Consumer Financial Protection Bureau (CFPB) reports that 40 percent of seniors aged 65 or older who owe on student loans cannot make the payments and are in default. Many seniors have student loan debt because they co-signed loans for children or grandchildren who were not able to make the scheduled payments. CBS news correspondent, Mark Strassman, advises seniors to be careful; if a senior needs to make payments and cannot, the funds can be taken from social security. Understanding student loan debt and how to plan accordingly to preserve assets can help seniors make decisions that will benefit them and their families.
For a legal consultation, call 856-857-6007
Understanding the risk involved and what options are available to avoid default can help in dealing with the cost of high debt for an older individual. The American Association of Retired Persons (AARP) published a report showing up to 15% of social security income can be garnished to pay back student loans. Between social security garnishment and a reduced income from retirement, many seniors are finding themselves in poverty. To avoid falling into a situation where repayment of loans is necessary, seniors should carefully consider what debt they can manage. The United States Department of Education, which keeps track of default rates, announced that in the past year, the default rate was 10.8% which means approximately1 in 10 seniors who have a loan of their own or co-signed a loan for a family member will go into default. Taking out a loan for a family member requires careful consideration. Experts advise seniors to avoid committing to hefty loans and to consider only borrowing an amount equivalent to their yearly income.
For seniors who have student loan debt, there are a few options. Repayment plans such as the income-driven graduated and extended repayment plans are some options. In the income-driven program, a senior would pay a portion of his or her income toward the student loan balance. A graduated repayment plan allows for smaller payments at first and then an increase in the payment over time. Extended repayment plans allow for an extension of the loan for up to 25 years, which results in lower payments. Seniors can contact the student loan servicing company to discuss these options.
Refinancing is another possibility to get a lower interest rate to bring down the monthly payment. However, it is best to find out all the options before choosing one as refinancing a loan may limit other opportunities. Seniors need to be aware of all their options to make the right decision. Careful planning can avoid a financial disaster.
Contact us today for a consultation with an experienced estate planning attorney.