Could student debt tarnish the golden years?
Imagine you are an Atlanta resident in your 80s and you’re still paying off student loans. That may not be a situation too many people are in right now, but according to the Government Accountability Office, it is a growing concern. And it’s something lawmakers in Washington are beginning to look into seriously.
What makes the scenario even darker is the GAO prediction that as the wave of baby boom generation Americans crests into retirement, many could see their Social Security benefits eroded to dangerous levels due to the government docking their benefits to collect on the past due student loan amounts.
How serious is the problem? Well, members of a Senate committee on aging got a bit of a data download on the issue this week. Included among the witnesses was a 57-year-old woman who said she anticipates she could be 81 before her student loans are cleared.
Like many in recent years, this woman is in dire financial difficulties. She started taking out school loans in her 30s as she sought to educate herself into a higher income bracket. Then she went through a divorce, found herself saddled with an underwater home mortgage and incurred bills due to health problems.
She has taken advantage of payment deferment for the past eight years, so she’s not in default. But she owes $126,000, and the interest is mounting.
The GAO says circumstances are not that good for other aging Americans. It says that of the $1 trillion in student loan debt outstanding, $18.2 billion of it is held by American adults over age 65. In addition, about a quarter of the loans held by those 65 to 74 are in default and about 155,000 Social Security recipients saw their benefits docked in 2013 as a result. That’s up from 31,000 in 2002.
As we have noted in past posts, student loan debt can’t be discharged in bankruptcy except in extreme hardship cases. But going through the process may result in a shedding of other debt and make student loan obligations more manageable. Determining if that’s right for you is something that needs to be discussed with a skilled attorney.
The Big Story, “Senior Americans burdened with student debt,” Kimberly Hefling, Sept. 10, 2014