Seniors over 60 still stuck paying off college loans
- Article by: YLAN Q. MUI , Washington Post
- Updated: April 1, 2012 - 9:38 PM
Whether it's their own loans or ones for children and grandchildren, many seniors can't retire these debts.
The burden of paying for college is wreaking havoc on the finances of an unexpected demographic: people 60 and over.
New research from the Federal Reserve Bank of New York shows that Americans in that age bracket still owe about $36 billion in student loans, providing a rare window into the dynamics of student debt. More than 10 percent of those loans are delinquent. As a result, consumer advocates say, it is not uncommon for Social Security checks to be garnished or for debt collectors to harass borrowers in their 80s over student loans that are decades old.
That even seniors remain saddled with student loans highlights what a growing chorus of lawmakers, economists and financial experts say has become a central conflict in the nation's higher education system: The long-touted benefits of a college degree are being diluted by rising tuition rates and the longevity of debt.
Some of these older Americans are still grappling with their first wave of student loans, while others took on new debt when they returned to school later in life in hopes of becoming more competitive in the labor force. Many have co-signed for loans with their children or grandchildren to help them afford ballooning tuition.
The recent recession exacerbated this problem, making it more difficult for older Americans -- or the youths they are supporting in school -- to get good-paying jobs. And unlike other debts, student loans cannot be shed in bankruptcy.
Maxine Bass, 60, of Minnesota said her granddaughter had dreamed of going to college since she was a child. But her mother could barely afford to provide her lunch money, much less pay for tuition. Bass had good credit and a steady job.
So when her granddaughter was accepted at St. Catherine University to study biology, Bass said she gladly co-signed for a $38,000 loan with her. But when the granddaughter fell behind on the payments as she hunted for a job with a decent salary, Bass' own finances took a hit. "I went into a panic, like, what was I gonna do?" Bass wondered.
Because of late fees and missed payments, Bass said she and her granddaughter owe about $69,000. They are now contributing monthly, but Bass is worried she won't be able to catch up.
A college degree has traditionally been viewed as a virtual guarantee of a better-paying job and a higher standard of living. And on the whole, that remains true. The unemployment rate for Americans with only a high school education is 9.2 percent -- more than double the rate for those with college degrees. Median weekly earnings for high school graduates last year were $638, according to government data, compared with $1,053 for college grads.
But with the recent recession prompting layoffs at white-collar law firms and investment banks as well as auto plants and construction companies, more Americans are finding themselves out of work and deep in debt. At a Senate subcommittee hearing last week, Treasury Secretary Timothy Geithner said the cost of higher learning should reflect the quality of education received.
Many students "haven't been able to earn a return that justifies the expense," he said.
Over the past decade, the cost of college rose between 2 and 6 percent per year, depending on the type of institution, according to the College Board.
Meanwhile, the New York Fed estimates that Americans owed $870 billion in student loans during the third quarter of last year, significantly outpacing credit card debt or auto loans. Borrowers age 60 and above accounted for 5 percent of that debt.
In some cases, student debt has been a burden for even financially responsible older Americans.
Sen. Richard Durbin, D-Ill., has introduced legislation that would allow private student loan debt to be discharged in bankruptcy, although borrowers would still have to pay off any federal loans.
Last year, President Obama addressed the issue by easing the repayment requirements for federal student loans. The new rules allow borrowers to pay 10 percent of their income for 20 years before the loan is forgiven.
Still, the bill would only address one aspect of what many believe is a more fundamental problem: the cost of college. Until that is solved, Suzanne Martin, an attorney with Consumers Union, said she anticipates older Americans' share of student loans will only increase.
"This current generation of borrowers is going to be a generation of seniors who are burdened with debt," she said.
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