This blog is the final piece in a series focused on older Americans with student debt. The first post finds that many older borrowers are repaying debt from their own education. The second post examines the financial status and demographics of seniors repaying their college loans using survey data. And the third post tells the stories of some of these borrowers.
Former college students report taking out loans to invest in their future financial security. Investing in higher education frequently pays off, as many people are able to pay off their student debt and go on to have successful careers with higher salaries. However, a portion of borrowers struggle year after year to make their loan payments and do not experience the anticipated financial gain. Eventually, they age into one of the fastest growing subsets of student loan borrowers—adults approaching retirement age.
Many borrowers who carry debt from their own education well into their senior year did so because they enrolled in low-quality programs that did not offer them enough assistance to graduate. Even after they graduated, they were not able to obtain the higher salaries they had anticipated and hoped for. When they repaid their student loans, they encountered a convoluted system where the advantages afforded to low-income borrowers were poorly communicated and difficult to obtain.
It makes sense that many of these elderly Americans defaulted on their loans after receiving subpar treatment during their time in higher education. Compared to 17% of borrowers under 50, 39% of borrowers over 65 who were still making their own student loan repayments were in default in 2015. By then, many had spent years dealing with unaffordable bills, ruined credit, garnished wages, and disappointed career dreams. They ended up with lower wealth and savings rates than their peers who never even attended college.
This is not how an investment in college is supposed to work. Financial mobility should be facilitated by higher education, and taking out loans to pay for it shouldn’t result in a lifetime of debt. But for this group of seniors—disproportionately women and people of color—the engine sputtered. Congress and the Department of Education should strive toward implementing seven commonsense reforms to guarantee that fewer borrowers join the ranks of these older Americans who are burdened with student debt. These reforms are founded on three guiding principles: long-struggling borrowers should receive targeted forgiveness; any debt borrowers take out should fuel their success; and the default system should be restorative rather than punitive.
Are you a senior struggling with student loan debt? You’re not alone. Millions of Americans over 60 are grappling with this burden, which can feel overwhelming and hopeless. But don’t despair! There are options available that can help you manage and even forgive your student loans.
Understanding Your Debt:
Before exploring your options, it’s crucial to understand the type of student loans you have Federal and private loans have distinct characteristics and forgiveness programs.
Federal Student Loans:
- Income-Driven Repayment (IDR) Plans: These plans adjust your monthly payments based on your income, making repayment more manageable. After 20 or 25 years of qualifying payments, the remaining balance is forgiven.
- Public Service Loan Forgiveness (PSLF): If you work for a qualifying non-profit or government agency, you may be eligible for forgiveness after 120 qualifying payments (10 years).
- Total and Permanent Disability (TPD) Discharge: If you become disabled and unable to work, your federal student loans may be forgiven.
Private Student Loans:
- Negotiation with Lender: Some private lenders may be willing to negotiate a lower interest rate or repayment plan.
- Refinancing: You can refinance your private loans with a lower interest rate to reduce your monthly payments.
Seeking Help:
Navigating the complex world of student loan forgiveness can be challenging Here are some resources to help you:
- Legal Aid Society of Cleveland: This organization provides free legal assistance to low-income individuals, including help with student loan issues.
- Student Loan Forgiveness Helpline: This free service can answer your questions about student loan forgiveness programs and guide you through the application process.
- Federal Student Aid Website: The U.S. Department of Education’s website offers detailed information about federal student loan programs and forgiveness options.
Additional Resources:
- The Hechinger Report: This non-profit news organization provides in-depth reporting on education issues, including student loan debt and forgiveness options.
- National Consumer Law Center: This organization provides resources and legal assistance to consumers facing student loan debt.
Frequently Asked Questions:
Q: Are student loans forgiven at age 65?
A: No, there is no automatic forgiveness of student loans at age 65. However, there are several forgiveness programs that seniors may be eligible for, depending on their loan type and circumstances.
Q: How can I get my student loans forgiven if I’m disabled?
A TPD discharge could be available to you if you have federal student loans and you become totally and permanently disabled. To apply, you’ll need to give your loan servicer medical records.
Q: Can I consolidate my student loans to make repayment easier?
A: Yes, you can consolidate your federal student loans into a Direct Consolidation Loan. This will simplify your repayment process by having one monthly payment instead of multiple payments to different lenders.
Additional Tips:
- Stay organized: Keep track of your loan servicer, account information, and any documentation related to your loans.
- Make regular payments: Even small payments can help reduce the interest you accrue and keep your loans in good standing.
- Explore all your options: Don’t hesitate to contact your loan servicer or a financial advisor to discuss your options and find the best solution for your situation.
Remember, you’re not alone in facing student loan debt. With the right information and resources, you can manage your debt and work towards a brighter financial future.
Ensure Borrowers Only Take Out Debt That Fuels Their Success
1. Protect Students From a Low-Value Education
When colleges serve their students well, graduates earn more and have an easier time repaying student loans. However, the colleges frequently provided inadequate support to the borrowers who continue to accrue debt well into their 60s and beyond. Compared to other students of comparable age, these borrowers are four times more likely to have attended a low-quality, for-profit university. Moreover, they have a higher likelihood than other borrowers of not having finished their degree, which is frequently an indication that they got insufficient help while they were in school.
The Department of Education recently finalized regulations that will require short-term programs and programs run by for-profit colleges to meet basic quality standards in order to disburse federal financial aid, along with additional rules that will provide increased consumer protections. Going forward, these regulations will protect many students from accruing the type of unaffordable debt that often leads to default. Congress must support the Department of Education’s efforts to implement these critical protections, including by providing the Department with adequate financial resources. Congress should also consider other measures to increase the returns students receive from postsecondary education, ranging from helping students navigate the cost of college to providing support for students’ basic needs.
2. Screen Struggling Borrowers for Loan Discharges
Current law allows for student loan forgiveness when eligible borrowers have made a certain number of qualifying payments under specific programs, like income-driven repayment plans and Public Service Loan Forgiveness (PSLF). The law also permits loan discharges under circumstances that make repayment unaffordable or unfair, such as when borrowers become permanently disabled, attend a school that subsequently closes, or enroll in a school that engages in misconduct, including misleading marketing or aggressive recruiting.
While these programs have traditionally been underused, the Department has recently made progress in automating and improving the application and discharge processes, contributing to $127 billion worth of forgiveness for 3.6 million borrowers. As part of an ongoing rulemaking process, the Department is also seeking to discharge loans—without borrowers needing to take action—for those who are eligible for forgiveness through repayment plans and existing programs but have not applied or enrolled.
Despite this progress, some borrowers eligible for discharge programs still need to take steps to receive relief. Therefore, many people who qualify for loan forgiveness wind up not knowing about the programs and not being screened for them, which causes them to default on their loans. New America encountered a number of elderly debtors who had been fighting for more than ten years to pay back their loans, risking wage garnishment and damaged credit, even though they were probably qualified for a discharge of their student loans during that whole period. Wherever possible, the Department of Education should keep automating the discharge process, especially through its regulatory authority and data matching with other government agencies. The Department must also put in place a procedure to examine troubled borrowers for eligibility for forgiveness and indications of fraud before they face any of the repercussions associated with student loan default.