Yes, seniors can have student loans
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Did you know that even decades after you finish college, you could be haunted by student loans well into your golden years? With student loan balances on the rise and many borrowers using parent PLUS loans to help their kids and grandkids get through college, there are many opportunities to wind up deep in college debt that you can’t afford.
CFPB Report Shows More Seniors In Debt Than Ever
According to the Consumer Financial Protection Bureau (CFPB), over the past decade, those aged 60 and over struggling with student loans has quadrupled and the balances carried has nearly doubled to $67 billion in total debt. What’s most disturbing is that the vast majority (73%) of these student loans are not for loan holder's education, but that of their children and grandchildren.
Older borrowers have tapped both federal and private student loans to finance the education of their offspring. Fortunately, private student loans have a statute of limitations, but federal student debt does not. Some student debt carried by seniors is not direct debt, but co-signed debt. But should the borrower default, the loans would wind up the responsibility of the senior.
Delinquencies Increase, Crisis Building?
In addition to the rising number of seniors with student debt, as well as the greater balances, CFPB research found that delinquencies are also climbing, with nearly 40% of federal student loan borrowers aged 65+ now in default. If the trend continues, this could become a full-blown crisis that puts seniors at risk of staggering debt while their incomes are both lower and fixed.
Unlike almost every other type of debt, student loans have no statutes of limitation. That means if you didn’t pay your college loans or borrowed for your child or grandchild, that debt could follow you to the grave if you don’t pay it. At one time, student loans were dischargeable in bankruptcy like all other debt, but now, it’s been carved out and treated differently.
Social Security Seized for Student Loans
Federal student loan servicers can garnish your wages, while most other creditors in North Carolina cannot, and can also seize social security benefits to try and collect on student loans. The CFPB study also found that those with student loans had less money saved for retirement than their counterparts without student loans.
The majority of co-signers to student loans (57%) are age 55+. The hope when a grandparent co-signs student debt is that the graduate pays back the loan, but when the job market was tight during the recession, unemployment grew, as did student loan default. Once the grad stops paying, debt collectors for loan servicers pursue the co-signers.
Student Loan Solutions for Seniors
The first thing to do if you’re a senior dealing with student loans is to consider an income-based repayment program. An income-sensitive program caps your federal loan payments at no more than 10% of your disposable income no matter how high the balances. Not all types of loans are eligible for these helpful repayment plans, and private lenders don’t offer these programs.
Another option to deal with unaffordable student loans is filing bankruptcy. If you’re young, healthy, and have years of earnings potential ahead of you, the bankruptcy court might not cut you a break on your student debt. But if you’re in (or nearing) your golden years, on a fixed income, and paying back the loans would keep you from supporting yourself, you could get relief.
Also, those who are disabled or have a chronic illness may be successful in persuading the court to discharge their debt. To pursue student loan relief in bankruptcy, your lawyer must file an adversary proceeding, which is an additional filing and will incur an extra fee. However, if your circumstances align with those that are likely to warrant partial or total discharge of debt, it may be worth the extra effort.
To find out more about student loan relief in bankruptcy, contact the Law Offices of John T. Orcutt. Read recent reviews from clients and then call +1-919-646-2654 to schedule a free North Carolina bankruptcy consultation at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.