More people are paying student loans after retirement

Two gray-haired, elderly women sit together on a wooden bench, reminiscing.

They're still repaying their student loans. (Photo Credit: CC BY/Alex Proimos/Flickr)

The concept of federal student loans for college was devised in 1965, and it seemed like a good idea at the time. Today, with a sluggish job market, stagnant wages and runaway costs of college education, student loan debt has quickly become one of the most crippling financial burdens U.S. citizens face. According to Bankrate, people are even having to face the burden of paying student loans after retirement.

True-to-life financial horror

Student loan debt has swelled to more than $1 trillion in the U.S., ahead of credit card and automotive loan debt. Such a tremendous number coupled with the working class’ increasing lack of ability to repay threatens to derail any economic recovery that has already occurred, post-recession. When the bubble bursts, the burden on taxpayers will be tremendous. Experts believe a new, larger economic crisis will come on like a great wave.

[Installment loans can help during a personal budget crisis]

On average, U.S. student loan debt per individual student has topped $25,000, 25 percent higher than the average 10 years ago. As 80 percent of student loans are government-issued, taxpayers will be on the hook when the bottom falls out.

“Parents and the federal government shoulder a substantial part of the post-secondary education bill,” a recent report by the Federal Reserve Bank of New York indicates.

Many of those left holding the bill are baby boomers who are near or already at retirement age. According to the Fed, Americans 60 and older carry a whopping $36 billion in student loan debt.

Past-due predicament

To add to the frightening tale of financial woe, the Fed notes that about 30 percent of all student loans have past-due balances that exceed 30 days. Bankruptcy cannot currently discharge this type of delinquent debt, just as it cannot absolve a bankrupt individual of child support or income tax debt. Lawmakers are working on a bill that may be able to push student loan debt off the table in the event of a bankruptcy, but for the time being, borrowers must continue to shoulder the burden.

Just like younger borrowers, 12 percent of student loan borrowers between the ages of 50 and 59 are late, while nearly 5 percent of borrowers, including co-signers, older than 60 are in arrears.

What can be done?

Mark Kantrowitz of Pittsburgh-based higher education finance website advises potential borrowers to think long and hard before either taking out a student loan or co-signing on a loan.

“Before you borrow money, do a cost-benefit analysis. How many years are you going to work, and will you be able to pay off the loan?” Kantrowitz advised.

Generally, it’s a bad idea for someone in their 50s or older to borrow more money than can easily be repaid in 10 years. No more than 10 percent of gross income should be required for payments. For those who are older, a five-year term may be more realistic, but caution should be exercised.

Then there’s the problem of not being able to afford student loans if you’re retired.

“Once you stop working, you probably aren’t going to have the money to pay off the loan,” said Kantrowitz.

Baby boomers still repaying student loans


Associated Press


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