ST. GEORGE —Retirees’ student loan debt has skyrocketed in the last decade.
Recently published studies on the state of debt in America reveals that nearly 3 million American adults age 60 and older currently have outstanding student loan debt, up from a high of 700,000 in 2005. Surveys indicate that over 70% of this debt is for loans taken out by parents or grandparents to help finance a child or grandchild’s education.
Hikes in college tuition and associated fees have caused loan sizes to increase as well. The average balance of a student loan debt is currently around $23,000.
The increase in student loans and the size of such loans has begun impacting some Americans’ ability to retire successfully. There are indications that many people over age 60 struggle to repay student loan debt, even after retiring. The result is a spike in late and missed payments, along with credit issues.
There are other severe consequences for older adults related to the student loan crisis.
For one thing, too much debt can make it challenging to save for retirement. In general, people near retirement who hold student loans save far less money than they will need to retire comfortably.
Some will have to work longer than anticipated. Outstanding student loan debt could force those near retirement to stay at their jobs for months, even years longer than they planned. In many cases, those with loans have found it necessary to take on part-time jobs in retirement.
There is also the risk of default: While just 17% of student loan borrowers under 50 fail to repay their loans, 37% of Americans over 65 are at risk of defaulting.
High debt can also cause some to postpone medical care, as many older Americans on the hook for student loans say they must often do without necessary medical attention to pay their loans. Budget cuts may also result in retirees spending less on prevention and wellness.
Student load debt can also become a barrier to paying off other debts. Paying off a student loan on time may mean less money to pay down different debt types, such as mortgages, credit cards and home loans.
Student loan borrowers may suffer increased stress and anxiety. A student loan can become a black cloud threatening an otherwise well-planned retirement. Older adults who should be enjoying the time after leaving the workforce may be consumed by anxiety over their debt and in danger of stress-related health issues.
Student loan defaults could also result in the loss of Social Security or other government benefits.
Student loans are one of the only exceptions to rules that protect federal benefits from garnishment. A growing number of people over 65, most of whom depend on Social Security as their primary source of retirement income, are at risk of losing some of their benefits. Social Security benefit offsets for student loans may result in severe financial hardships for older borrowers.
Summing it up
Older Americans are not, as a whole, equipped to pay back student loans.
Most older adults with student loans usually don’t experience income growth in their later years to offset the additional debt. Having a student loan repayment at or near retirement will likely result in you having much less money for living expenses at a time when you need it the most.
Before considering taking out or co-signing on a student loan, you should consult your retirement and income specialist. Your advisor can help you discover the short-term and long-term impacts of the loan and perhaps offer alternative strategies. While helping your loved ones meet their educational goals is a worthy cause, it shouldn’t require you to forfeit your financial future.
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