Student Loan Debt’s Impact on Retirees

You’re probably aware of the student debt crisis in our country, but what you might not know is that it’s not just the problem of the Millennial generation. In fact, of the 44 million borrowers who owe more than $1.5 trillion collectively, a large percentage is made up of senior citizens in retirement. As of the last time Forbes analyzed Federal Reserve data, people between the ages of 60 and 69 owe about $85.4 billion.

For many of these seniors, this means garnishment of their social security or even disability payments if they fall behind on student loan payments. Some of them will never be able to pay off their student debt before they die. What’s more, many student loans don’t discharge when the borrower passes away, which means the lender can come after the estate to collect the debt.

How did this happen, when most student loan repayment plans last no more than 30 years, even if they’re extended? There are a few different reasons seniors have accrued this mountain of debt. First, it’s often necessary for older people to go back to school to learn new skills and increase their job prospects. They might also go into debt co-signing on a student loan for a child or grandchild, or taking out parent PLUS loans to help their kids get through school.

Seniors with student loan debt can face serious financial difficulties if they retire. Most Americans don’t have a sufficient retirement account to fund their basic living expenses, let alone pay student loan debt. It’s easy to see how seniors fall into poverty or have to rely on family members for their basic needs.

What’s the solution? Student loans can only be discharged in bankruptcy in certain rare, specific situations, which means that seniors, like anyone else with student loan debt, have to come up with a plan for repayment. Fortunately, there are some options available.

• An income-driven repayment plan lets you pay a percentage of your income for up to 25 years, after which your loan balances are forgiven. These plans include PAYE, REPAYE, ICR, and IBR, and while you’ll have to pay income taxes on forgiven amounts, this may not be an issue for seniors who might not be around to pay the loans off.
• A graduated payment plan lets you pay small amounts in the beginning that balloon slowly over time. These plans only last 10 years, unless you take out a consolidation loan.
• An extended repayment plan stretches your repayment timeline. By lengthening it up to 25 years, you can set a lower monthly payment. In other words, you’ll pay longer on your loan, but be able to lower your monthly expenses.
• Refinancing student loans is another option. You’ll need excellent credit to do this effectively, but that isn’t a problem for most senior citizens. It’s important to note, though, that you will no longer have access to consumer benefits available for a federal loan, like deferment, forbearance, and access to the income-driven repayment plans.

If you’re struggling with debt and need information about debt relief, trust the compassionate, dedicated attorneys at Cutler & Associates to work with you and keep your best interests in mind. A Chicagoland bankruptcy firm, we have clients throughout the Chicago metropolitan area, and work hard to make sure our clients get what they need. Our offices are conveniently scattered throughout the area, with locations in Aurora, Chicago, Hoffman Estates, Lisle, Naperville, Oak Brook, Schaumburg, and Skokie. Contact us through our website, or call (773) 360-5802 for more information.