(WTNH) — The burden of dealing with student loan repayments is often associated with recent college graduates. But a recent study by credit reporting agency Experian reveals that people in their 60s are carrying on average the same amount of debt as people in their 30s.
Financial Consultant John Caserta shares his advice.
On average, how much student debt do 60-year olds have?
According to Experian, as of the end of Q2 2019, the average student loan balance for consumers in their 30s was $40,476. Meanwhile, consumers in their 60s had an average student loan balance of $33,804.
Why do people in their 60s have this amount of student debt?
There are two primary reasons why John Caserta says he’s seeing this happen:
· Borrowing money for their children’s education.
73% of borrowers over the age of 60 revealed that they had borrowed money to finance education for a child or grandchild, according to 2017 study from the Consumer Financial Protection Bureau.
Private loans often require a co-signer that is older than 55.
Many lenders are targeting parents with loans to help them pay off their children’s debt.
Parent Plus Loans, which are federal direct student loans available to parents of dependent undergraduate students, tend to have looser underwriting requirements.
Federal law limits how much students can borrow based on their dependency status and how close to graduation they are. In contrast, there is no limit for parents.
· Borrowing money for their own education.
Career changers – especially following the financial crisis in 2008 – borrowed money to go back to school.
How have student loans impacted this older generation?
· Social Security benefits can be garnished.
Federal law states that up to 15% of your social security benefit can be garnished (or offset) to repay student loans. And between 2002 and 2015, “offsets” increase 407% (for ages 50-64) and 540% (ages 65 and older).
· Delayed retirement.
· Putting off personal goals or needs.
What can seniors with student loans do?
Options are limited are very much similar to the options that young individuals have.
· Evaluate different repayment plans.
Pay as You Earn, Income-Based, and Income-Contingent plans can help limit monthly payments to a percentage of your discretionary income and can qualify for loan forgiveness under the Public Service Loan Forgiveness program. But beware; there may be tax consequences for amounts that are forgiven.
Extended repayment plans can lower your payments and extend them up to 25 years.
Graduated repayment plans can keep payments lower initially but will ultimately increase over time.
Refinancing with a private lender can help lower your payments by lowering the interest rate on your loans. But by refinancing you may also use lose the ability to place your loans in forbearance or deferment.
Tips to Avoid or Limit the Impact of Students Loans?
Consider the amount being borrowed and future payments.
Consider the type of loan – federal loans have fixed interest rates and flexible repayment options whereas private loans may not.
Avoid using retirement funds.
Be careful about using home equity – interest is no longer deductible and it can adversely affect financial aid qualification.