According to a 2017 report by the Office of Consumer Financial Protection, the number of people aged 60 and over on student loans has quadrupled from around 700,000 to 2.8 million. between 2005 and 2015. The average debt incurred by older borrowers also nearly doubled during this period. from € 12,000 to € 23,500.
Most seniors have borrowed for a college loan or a co-signed student loan on behalf of their children and grandchildren. But some Americans aged 50 and over have gone into debt to finance their own education or help their spouses graduate. Many of them are struggling to meet their financial obligations. Since 2015, nearly 40% of federal student loan borrowers aged 65 and over have defaulted, says financial protection.
Worse still, a growing number of older borrowers have seized a portion of their Social Security pension or disability benefits for non-payment of federal student loans.
The Government Accountability Office recently reported that 114,000 older borrowers were subject to such seizures in 2015. The typical garnishment was just over € 140 per month. And nearly half of the defaulting borrowers were subject to maximum garnishment, or 15% of their social security benefits.
“America’s oldest consumers do not deserve to see their proverbial golden years tarnished by heavy student debt or reduced social security benefits for helping a younger family member to study “says Robin Howarth, senior researcher at the Center for Responsible Loan.
If university debts strain your budget or jeopardize your social security payments, consider these options.
Bone Up on Loan Modification Options
You may be able to modify unmanageable loans and temporarily reduce your payments through an adjournment or credit abstention. These strategies allow you to defer the refund.
For example, you may be eligible for an economic hardship adjournment if you are having extreme difficulty repaying your loans, which affects your ability to buy food, keep a roof, or buy prescription drugs.
Know the details of your loan and your loan officer
You can also avoid payment defaults by keeping up to date on loan details and making sure all payments are made in the right place, which is usually a student loan server agent.
Whether you have a federal or private student loan, the Serving Agent must be able to provide you with all relevant information relating to your account, including the balance owing, the required monthly payment, the interest rate and the date of payment.
Researchers at the Center for Responsible Lending believe that increasing the number of elderly Americans in default could be avoided if loan officers provided improved assistance and information to consumers in financial difficulty. Until these calls are taken into account, it is up to you to take the initiative to contact your loan officer.
Also check all forms and ask for monthly statements for all student loans.
Need to find your loan officer? The Ministry of Education maintains a list of federal student loan management companies.
Understand your rights and obligations regarding cosignalisation
If you have co-signed a student loan for your children or grandchildren, you are not alone. According to the CFPB, about 73% of older Americans with university debt borrowed for a younger family member. (The rest borrowed for their own education or that of a spouse).
“Unfortunately, helping your kids go to university by indebting you yourself hurts your personal interest and ability to retire,” said Rebekah Barsch, vice president of planning at Northwestern Mutual. But such debt occurs too often, although there are probably other more conservative options, she says.
“In reality, students have the choice between a college and a university, they can choose a school where tuition fees are 50,000 euros a year or 10,000 euros a year.” Students can also get scholarships But there are no scholarships for retirement, “says Barsch.
If you decide to serve as a co-borrower, do not just assume that once your family member has graduated, he or she will make payments.
Be very clear with your loved ones to know exactly who will repay these loans and explain the agreements in writing. Otherwise, if your child or grandchild can not pay on time, your finances and credit may lose value.
If you are already paying off a student loan on behalf of your loved ones, it is not unreasonable to ask them to wean themselves off your support and take responsibility for the loan. Try to set a deadline to lift your burden so you can enjoy your last years.
In addition, be aware that some lenders, such as Sallie Mae, allow the borrower to obtain a “co-signer receipt”, which legally allows you to obtain a student loan under specific predefined conditions.