A New Nightmare from Your College Days: Un-Paid Student Loans Catching up with Baby Boomers

Category: Financial and taxes in retirement

September 22, 2014 — Just about everybody we know still has the same recurring college-days nightmare: the final is tomorrow, and somehow you managed to overlook going to class all semester. You have no notes, know nothing, and doom is imminent. Well add to that one more, real life nightmare – your unpaid college loans.

The GAO analyzed data from the Survey of Consumer Finances and found that about
3 percent of households headed by those aged 65 or older — about 706,000 households — carry student loan debt. This compares to about 24 percent of households headed by those aged 64 or younger. Compared to student loan debt, those 65 and older are much more likely to carry other types of debt. For example, about 29 percent carry home mortgage debt and 27 percent carry credit card debt. Still, student debt among older American households has grown in recent years.

Although federal student loans can remain unpaid for more than a year before the Department of Education takes aggressive action to recover the funds, once initiated, the actions can have serious consequences. For example, a portion of the borrower’s Social Security disability, retirement, or survivor benefits can be claimed to pay off the loan. From 2002 through 2013, the number of individuals whose Social Security benefits were offset to pay student loan debt increased about five-fold from about 31,000 to 155,000. Among those 65 and older, the number of individuals whose benefits were offset grew from about 6,000 to about 36,000 over the same period, roughly a 500 percent increase.

Bottom line
If you failed to pay your student loans don’t think you are out of the woods. It looks like there is a good chance your Social Security benefits might be reduced to pay them off. Here is a link to the GAO Report.

Comments? Do you still have any student loans to pay off? If so, do you have a strategy for taking care of them, or have you actually seen your SS benefits get cut?

Posted by Admin on September 22nd, 2014

7 Comments »

  1. This was a BIG fear of mine due to the ‘usury-scale’ interest charges & that’s been awhile. I can’t begin to imagine what they are today! Anyway, as soon as I had any money at all accumulated I hired an attorney who helped get the amount down to a (if not reasonable), at least payable amount. Get a specialty attorney to knock the payable amount due down now! You can’t put this in bankruptcy either!! You can’t hide yourself under a rock. They will find you. It’s easier to bargain with late-paid income taxes than these people! On top of the rising-rising- interest rates, they never did give me my full amount. My bank ‘took’ some of my money. Circumstances arose so that I couldn’t’ t finish school & I never got a job where I could pay the monthly-due amount, never mind the insane interest rates!!! Do what you have to to get it paid!

    by Jeanne C — September 23, 2014

  2. I’m 66 and still working full time. My school loans won’t be paid off until 2027; I doubt I’ll be around by then. Luckily I may be able to take advantage of the loan forgiveness program in which you must make payments on your loan for 10 years before any balance can be discharged and you must meet certain qualifications. I’ll qualify because I’ve always worked for nonprofit hospitals or the military as a nurse. However, the 10 years won’t start for anyone until 2007, which means anyone who qualifies will not be able to discharge their loan(s) until at least 2007. You also must work at least 30 hours/week at those jobs. I had two jobs in 2007, but the only one that was for a nonprofit hospital was not full time, the jobs I held didn’t start qualifying until 2008, meaning I must work at least 30 hours/week for another 4 years. I have cancer and some other health problems, but if I haven’t dropped dead from the cancer, I know I must work full time those other 4 years at a nonprofit job, because essentially all I will have to live on after that is social security, and I’m single. Even at a reduced payment, it would be a hefty chunk of my sole income. Having the school loans has really impacted my future for at least 4 more years. At the same time, I’m grateful that it has afforded me (no pun intended) a higher income than I would have had without this education I was able to obtain thanks to the school loans. As a single parent, I really needed it to take care of my family.

    by Kris — September 23, 2014

  3. I meant to say, “…anyone who qualifies will not be able to discharge their loan(s) until at least 2017.”

    by Kris — September 23, 2014

  4. Please teach your children not to borrow money for school. This is a real problem in America today. Students are borrowing $100,000 + for a bachelor’s degree. State schools and Community colleges are much cheaper than that in most states. It is possible to pay for college without going into tons of student loan debt. It’s called work.
    I listen to a financial person daily and it amazes me how many people have thousands of dollars that they owe and they are making $12 an hour. Good luck paying it back. Jeanne was right, you can’t file bankruptcy to get rid of it. The only way out is to die. Not my idea of a great way to get out of debt!

    by Sunny — September 24, 2014

  5. I thought that the IRS would take any delinquent money from tax returns if someone had not paid their student loans. Why would they wait until a person was retired? With all the technology around this is ridiculous.

    by Jennifer — September 24, 2014

  6. I think you misunderstood, Jennifer. You are absolutely right that the IRS will confiscate one’s tax returns if someone’s student loan is delinquent; they don’t wait until the person’s retired. The loan company may also garnish a person’s wages. All I am saying is that you are still expected to continue paying off that student loan whether you are sick or retired, etc. Payments due won’t be canceled just because one reaches a certain age or is no longer working.

    by Kris — September 24, 2014

  7. A loan is a loan, no matter what the loan was made for. You signed the paper and should have to repay the amount that you borrowed. Do you think this money grew on a tree and therefore you shouldn’t have to repay your debts? If you don’t repay it, they who does? Me, your children, your grandchildren?

    by Lucy — September 26, 2014

RSS feed for comments on this post. TrackBack URL

Leave a comment

Salary Data custom salary reports specific to your state and industry.