More and more seniors are having student debts in their retirement years. The number of people aged 60 and over with outstanding student loans has quadrupled in the last 10 years, from 700,000 in 2005 to 2.8 million in 2015, according to a recent report from the Office of Financial Protection of Canada. consumers. The average amount of student loan debt among older borrowers doubled to € 23,500 in 2015. Older borrowers now owe about € 66.7 billion for their student loans.
Having student loans in the 60s and over can make the payment of the pension particularly difficult. Those who do not pay back their federal student loans may even have their tax refunds and some of their social security benefits frozen to pay off the loan. Here’s how to deal with student loan debt as you approach retirement.
Think hard about paying for college for a parent.
While some borrowers have their own student or spousal debt in their retirement years, most of the current student loan debt among people aged 60 and over has been contracted to pay the fees. college for a child or grandchild (73%). Of the 870,000 people aged 65 and over who took out a student loan in 2015, 210,000 benefited from a Parent PLUS loan, which allows parents to borrow for their children’s undergraduate education, according to the Government Accountability Office of the United States. “You should not borrow more for your children and grandchildren than your annual income, so you should be able to pay it back in 10 years,” says Mark Kantrowitz, publisher and vice president of strategy for Cappex.com and co-author. of “Archiving the FAFSA.” “If the retirement is in less than five years, you should borrow twice less and if your income is less than 150% of the poverty line, you should not borrow at all.”
You may not want to co-sign for a student loan.
Private student loan lenders often require a student to apply for a loan from a co-signer who becomes responsible for the loan if the student borrower does not repay the money. Parents and grandparents are usually called upon to co-sign private student loans, and most current student loan co-signers are aged 55 and over (57%). “Suppose you are going to repay this loan yourself and ask yourself if you can afford it,” says Kantrowitz. “You want to help your children and your grandchildren, but depending on the amount of debt that will be involved and your income, you may not be able to afford it.”
Do not neglect your payments.
Borrowers are increasingly likely not to repay their student loans as they age. About 37% of those aged 65 and over who took out a student loan defaulted in 2015, compared to 29% of borrowers aged 50 to 64 and 17% of the youngest federal student loan holders. “You do not want your student loans to default,” said Earl Schultz, founder and chairman of Strategic Wealth Advisory in Birdsboro, Pennsylvania. “Look at every debt you have and formulate a comprehensive plan to repay it.” If you miss a payment, try to resume it or renegotiate the terms of the loan as soon as possible. In some cases, you can rehabilitate the loan by making payments on time.
Sign up for a repayment plan based on income.
Some types of loans are eligible for income-based repayment plans that will reduce payments to an amount appropriate to your income level. “This will limit your bill to a reasonable part of your income,” said Ronnie Cabroe, senior fellow of the Consumer Federation of America and former deputy director of the Consumer Financial Protection Bureau. “The rest is forgiven after 20 years or after your death.” Extending the term of the loan can also reduce your payments, but may result in more interest payments over the life of the loan. You may be able to consolidate or refinance your loan and pay a lower rate in the future.
Your social security payments may be partially withheld.
Once your loan is overdue, the federal government can seize your salary, keep your tax refund, or use a portion of your social security benefit to repay the loan. According to the CFPB report, some 40,000 people have had their social security benefits partially withheld to repay their federal student loans, up from 8,700 in 2005, up from 8,700 in 2005. Up to 15% of payments from may be retained to repay a student loan debt, but monthly Social Security checks can not be reduced to less than $ 750 per month, an amount not adjusted for inflation each year. “If they fail to default on federal loans, it will take a few years before they can seize Social Security benefits,” says Kantrowitz. “Contact the Ministry of Education and ask for an alternative repayment plan.If you can argue that you can not afford your current repayment plan, the Ministry of Education has the power to create an alternative repayment plan and allow you to repay this. “
Beware of aggressive debt collectors.
According to the CFPB, people aged 62 and over filed about 1,100 student loan complaints and 500 student loan debt collection complaints. Retirees told the CFPB that service providers made it difficult to enroll in income-based reimbursement plans or incorrectly allocate payments to other loans with the same service provider. Some older people report receiving several harassing calls from debt collectors, sometimes with offensive language. “If your supplier gives you cold, file a complaint with the Consumer Financial Protection Bureau to get the right answer,” said Chopra. “Do not feel rushed by your student loan provider, it’s their job to give you all the information you need to make the right choice.”