If you listen to any respected economist or financial advisor talk about the state of the average American’s personal financial situation, you’re going to hear about the negative effects of student loan debt. Of course, when many hear the phrase “student loan debt,” they automatically assume it’s new college graduates who are carrying the financial load.
Sadly, while this may have been the case in decades past, the tide is turning. Today, it’s not only current and newly graduated college students who are forced to allocate a large percentage of their earnings toward paying off student loan debt – their parents and grandparents are shouldering the burden as well.
Total Senior Student Loan Debt: It’s a Problem
According to a report issued by the Government Accountability Office, senior student loan debt grew from $2.8 billion in 2005 to $18.2 billion in 2013. Out of all households headed by an adult between the ages of 65 to 74, only one percent held student loan debt in 2004. Only six years later, in 2010, that number grew to four percent.
Senior student loan debt is not only a result of loving relatives taking out loans to help the younger generation. In many cases, the loans were for themselves, to either continue their education or start a new, hopefully better-paying career.
In fact, 80 percent of all senior student loan debt was borrowed for those seniors personally, with only 20 percent of the debt borrowed for their dependents or other relatives.
Long-Lasting, Serious Effects On Your Finances
Student loan debt is not easy to ignore. Unlike other types of consumer debt, such as credit card balances and mortgages, student loan debt is not discharged in bankruptcy. There are no exceptions for seniors in this case either.
In fact, seniors may be even more affected by student loan debt than any other demographic. While adults in their mid-twenties have a lifetime of earnings to pay off the balances, seniors do not. If they are collecting Social Security or disability, these benefits can be garnished if they fail to make their payments on time. For aging adults, Social Security and disability may account for a large percentage of their annual income, and any reduction could have serious implications for their budget and quality of life.
What Should You Do?
Even if student loan debt is completely ruining your finances, don’t neglect to make your payments if possible. Defaulting will only hurt your credit. First, contact the Department of Education and learn about three different options that may lower the monthly payment on your government-subsidized loans. You could opt for the “pay as you earn” choice, transition to an income-based or income-contingent repayment plan.
If you have loans from a private lender, contact them and explain your financial situation. While private lenders do not offer income-based payments, you could potentially negotiate a lower monthly payment and interest rate or consolidate loans and extend the payment lifetime to help reduce monthly obligations.
Finally, see if there are other areas in your budget where you can cut costs. Are you taking full advantage of Medicare and other money-saving senior health plans? Call My Senior Health Plan today and see if you can lower your healthcare bills, freeing up your cash to go towards your student loan debt.