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ST. GEORGE –Retiree debt on student loans has skyrocketed over the past decade.
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Recently published studies on the debt level in America show that none3 million American adults aged 60 and over currently have outstanding loan debt up from 700,000 in 2005. Surveys show that over 70% of that debt is related to loans taken out by parents or grandparents to help finance a child or grandchild’s education.
Rising tuition fees and related fees have also caused loan amounts to increase. The average balance of a student loan debt is currently around $ 23,000.
The rise in student loans and the size of such loans has started to affect the ability of some Americans to successfully retire. There is evidence that many people over 60 have difficulty paying back student loan debts even after retirement. The result is an increase in late and missed payments, as well as credit problems.
There are other serious ramifications for older adults related to the student loan crisis.
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For one, debt that is too high can make saving for retirement difficult. In general, people who are about to retire and have a student loan are saving far less money than they would need to have a convenient retirement.
Some have to work longer than expected. Outstanding student loan debt could force those close to retirement to stay in their jobs for months, or even years, longer than planned. In many cases, borrowers have found it necessary to take up part-time work in retirement.
Add to this the risk of default: While only 17% of student borrowers under 50 fail to pay back their loans, 37% of Americans over 65 are at risk of default.
Large debts can also cause some to postpone medical care, as many older Americans looking for student loans say they often have to forego essential medical care to pay for their loans. Budget cuts can also result in retirees spending less on prevention and wellness.
Student debt can also become an obstacle to paying off other debts. Paying back a student loan in a timely manner can mean less money is required to pay off various types of debt such as mortgages, credit cards, and home loans.
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Student loan borrowers may experience increased stress and anxiety. A student loan can become a black cloud threatening an otherwise well-planned retirement. Older adults who should enjoy the time after retirement can be consumed by debt fears and stress-related health problems.
Student loan defaults can also result in loss of social security or other government benefits.
Student loans are one of the few exceptions to the rules that protect federal benefits from seizure. A growing number of people over 65, most of whom rely on social security as their main source of income for retirement, are at risk of losing some of their benefits. Settling social security benefits for student loans can create severe financial difficulties for older borrowers.
In summary
Overall, older Americans are unable to repay student loans.
Most older adults with student loans typically don’t experience income growth in their later years to offset the additional debt. If you have a student loan repayment at or near retirement, you are likely to have a lot less living expenses when you need it most.
Before considering taking out or co-signing a student loan, you should check with your pension and income specialist. Your advisor can help you see the short and long term implications of the loan and possibly offer alternative strategies. While helping your loved ones achieve their educational goals is a good thing, you shouldn’t lose your financial future.
Copyright © Lyle Boss, all rights reserved.
Lyle Boss is a member of Syndicated Columnists, a national organization that advocates a fully transparent approach to money management. As an asset protection instructor, he has helped thousands of seniors find their financial retirement options. Its clients include government employees, teachers, doctors, farmers and business people to name a few. Boss has been actively teaching advanced estate planning and asset preservation for more than 20 years in locations like the University of Utah and in over 200 Senior Retirement Consumer Education Workshops throughout Utah, Idaho, and Wyoming. Boss and his wife Deanna live in South Ogden and St. George, Utah.
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