When I first graduated from college, I loved to joke that I’d be in student loan debt forever. After all, graduating with tens of thousands of dollars in debt with a degree in comparative literature pretty much meant I was on a long road to my eventual payoff.
Of course, my joke ended up making light of what has become a very real – and very scary – situation for today’s senior citizens. As much as I joked about being in retirement and in debt, there are many out there who are facing that reality. In fact, today’s senior citizens now owe $18 billion in student loan debt.
Since I’m not a fan of reporting scary news just for the sake of it, let’s talk about two things: (1) how senior citizens facing this debt can carve their way out of it, and, (2) how today’s young adults can ensure that they don’t suffer from the same fate.
Senior Citizens Struggling with Student Loan Debt
Student loan debt is frustrating for all, but for senior citizens it’s dangerous. Young adults have years to increase their income and work towards payoff, while seniors rely on their retirement, savings, or social security alone. And those incomes don’t often increase, usually staying stable at best.
CNN Money quotes that this debt is largely their own (80% of the time), not their children’s debt that they took on (20% of the time). And the older they get, the likelier they are to default:
“Default rates have also been rising with a debtor’s age, the report found. While only 12% of federal student loans belonging to people ages 25 to 49 were in default in 2013, that rate spiked to 27% for Americans between 65 and 74 years old, and to more than 50% for people 75 and older.”
What’s the worst part about this? Default won’t get them out of debt. In fact, it could lead to their social security and taxes being garnished:
“Last year, 156,000 Americans had their Social Security benefits garnished because they had student loans that were in default, according to analysis conducted by the U.S. Treasury for CNNMoney. That’s triple the 47,500 people who had payments garnished in 2006.”
Like all debt, the best option is to take control now, no matter how dire the situation may seem. The sooner, the better.
Help for Senior Citizens in Student Loan Debt
Senior citizens struggling with student loan debt don’t always have steady income or raises to rely on to help them get out of debt. But what they do have is the Income Based Repayment Plan. This plan caps your monthly student loan payments at 15% of your income, which means the payments should be more manageable.
Another option is forbearance, although that is more of a short-term solution (since you can’t forbear the loans forever and at some point will need to earn more income if you can’t make your payments when the period is over).
And finally, if you have a good credit score, you could try consolidating at a lower interest rate to decrease your monthly payment amount. However, if you do consolidate your student loans*, you should only consolidate for a fixed rate. A variable rate may come lower but it can also increase at a moment’s notice, thus putting you right back into a financial bind.
Get offers for lower-interest rate debt consolidation loans here on ReadyForZero!Check your rate using ReadyForZero's free debt consolidation tool. People have saved thousands by consolidating higher-interest debts using a single, personal loan, this will not negatively impact your credit. Check Your Rate Now
How to Ensure that You Won’t Be in Student Loan Debt into Retirement
If you’re a young or middle aged adult with student loan debt, let this statistic bring to light the importance of paying off your student loan debt while you’re still working full time and have an easier ability to increase your income. And if your current budget is tight, here are a few tips to help you make more progress without unrealistic financial expectations:
The best way to boost your student loan debt repayment on a tight income is to make biweekly payments. By doing so, you can significantly decrease the life of your loan and the total interest paid.
Another way to pay your loans off faster is one mentioned above: exploring student loan debt consolidation.* Again, a fixed rate is often better, but you have more ability to explore a variable rate if your repayment time is short enough and if your budget can handle a possible rate increase. Since variable rates move with the market, they carry much more risk, but the savings could be worth it if the possible jump won’t break your budget.
*Note: if your student loans are federal loans, consolidation done through private lenders will take away your options for forbearance, deferment, and forgiveness – so that’s something else to keep in mind before deciding to consolidate.
And if you have enough time, it’s not a bad idea to take on a second job or do some freelance work on the side to earn extra money and apply all of it to your loans to decrease that balance even more. The younger and more unencumbered you are, the easier this is to do! So take advantage of the opportunity if it’s available to you.
Breaking Free from Student Loan Debt
Student loan debt isn’t going anywhere anytime soon – and now that it’s affecting people of all ages it’s becoming that much more important to understand how to get it under control. And of course, it’s just as important to stay in touch with the news! Laws are being introduced regularly to solve this problem so the more you know, the more you can save. And visit our student loan debt resource center for more information on your options.
Image Credit: S Reilly