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The number of older student loan borrowers Is rising

Daniel Marsula/Post-Gazette

The number of older student loan borrowers Is rising

Most student loan borrowers are young adults, but the number of older Americans with education loans has quadrupled in the last decade. Many of them say that difficulties with loan servicers are adding to their debt-management struggles.

Americans age 60 and older are the fastest-growing group of student loan borrowers, according to a new report from the Consumer Financial Protection Bureau that examines borrower complaints. There are now about 2.8 million Americans who are 60 or older with at least one student loan.

Some older borrowers are carrying their own student loans, but most have education debt taken out on behalf of their children or grandchildren, either by borrowing the money themselves or co-signing loans with the student as the main borrower, the report found.

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The average debt for such borrowers has doubled over the last 10 years, to about $24,000. Most of the borrowers have other types of debt as well, including mortgages and credit card debt.

Many are struggling under their debt burden, which hampers their ability to pay for medical care and to save for retirement, the report found. Delinquencies are rising, and nearly 40 percent of federal student loan borrowers who are 65 and older were in default in 2015.

Stacy Canan, head of the consumer financial bureau’s Office for Older Americans, said it was harder for older Americans to get back on track after defaulting on a student loan, because they might already be retired and their incomes generally were not rising.

“The system is harder on older people,” said Persis Yu, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center.

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A recent analysis by the Government Accountability Office found that older borrowers were increasingly subject to “offsets,” or deductions, from their Social Security payments when they failed to pay their federal student loans.

For people who rely on Social Security to cover basic needs, having their monthly check reduced may push them into poverty, said Whitney Barkley-Denney, a specialist in student loans with the Center for Responsible Lending. She criticized loan servicers — the companies that manage loans and collect payments — for not guiding older borrowers into federal programs that can lower their monthly payments. As for defaulting, “the borrower shouldn’t even get to that point,” Ms. Barkley-Denney said.

Antionette Brown-Hall, who is 67 and a widow in Philadelphia, said she was desperate when, about two years ago, the government began docking $197 from her monthly Social Security check of about $1,300 to cover a federal student loan she had taken out three decades earlier. The benefit must cover her mortgage, utilities, telephone bill and food, she said. When the deductions began, she said, “I literally did not have any money to eat with.”

Ms. Brown-Hall, a former tax preparer, said she had borrowed to attend a business school that took her money, but which soon closed. The loan of about $5,200 ballooned to nearly $17,000 by early 2015. With the help of a lawyer at Community Legal Services of Philadelphia, she was able to stop the offset and enroll in a federal student loan repayment program that reduced her monthly loan payments to zero, because of her limited income. The catch: She must remember to file paperwork each year to remain eligible for the program.

“I’m on it,” she said.

Ms. Canan urged older borrowers to contact their loan servicers as soon as they encountered problems making payments to discuss flexible repayment options before they fall too far behind.

The bureau said borrowers also complained that servicers often misallocated payments they made on loans they co-signed for children and grandchildren. (Student loans from private lenders often require co-signers.) One borrower, for instance, said his payment was allocated to all of the borrower’s loans, rather than the specific loan that he co-signed. Borrowers have the right to see account information if they are co-signers, the bureau said, to make sure the payments are correctly applied.

Here are some questions and answers about older borrowers and student loans:

Q: What if I want to co-sign a student loan for a child or grandchild?

A: Ms. Canan urged older people to be cautious about co-signing student loans. Many people do not understand that they are not just “vouching” for the borrower, but are in fact agreeing to be responsible for the loan.

“There’s a lot of confusion about co-signing,” she said. If the primary borrower runs into financial difficulty, you as the co-signer are responsible for the full amount of the loan.

“Really think it through,” she said, and co-sign only if you think you will be in a position to repay the loan down the road, if needed.

Q: If I took out a Parent Plus loan, can I enter a flexible repayment plan?

A: Borrowers of Plus loans, the only federal loans available to parents of undergraduates, have fewer flexible repayment options and people must jump through some hoops to qualify for them, said Lauren Asher, president of the Institute for College Access and Success. Parent Plus loans must first be consolidated into a new loan to become eligible for a federal program offering lower payments.

The program, known as income-contingent repayment, is less “robust” than options for other types of loans, Ms. Canan said, but may still offer relief to older borrowers.

Q: Can my Social Security check be docked if I fail to pay a private student loan?

A: Generally, no. Borrowers have complained about threats by debt collectors to reduce their Social Security payments if they fail to repay private student loans, which are made by banks or lenders other than the federal government. But such offsets can occur only with federal debts. The bureau said, “Debt collectors may not offset your Social Security benefit in order to repay a private student loan.”

First Published: January 12, 2017, 5:48 p.m.

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 (Daniel Marsula/Post-Gazette)
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