The long-term financial security of many older Americans is being threatened by an unexpected source — student loan debt — according to a new report from the Consumer Financial Protection Bureau.
In the past decade, according to the report, the number of older student loan borrowers has quadrupled, from about 700,000 to 2.8 million. Also, the amount of debt per older borrower has roughly doubled, from $12,000 to $23,500. Three-fourths of the loans are assumed by seniors to pay for the college education of children or grandchildren.
Calling it “alarming” that older adults are the fastest-growing segment of student loan borrowers, CFPB Director Richard Cordray said in a statement that his organization is “concerned that student loans are contributing to financial insecurity for many older Americans and that student loan servicing problems can add to their distress.”
Older borrowers struggling to make payments complain about obstacles to enrolling in income-driven payment plans and accessing their protections as co-signers, the report said. In 2015, almost 40% of federal student loan borrowers aged 65 or more years were in default.
Some of the problems about industry practices reported by older consumers, according to the CFPB:
- Social Security benefits for older borrowers in default are offset to repay a federal student loan, despite older Americans’ right under federal law to cure their default and seek payment relief under income-driven plans.
- Certain federal benefits, such as Social Security benefits, generally are protected from collection for defaulted private student loans. Some older borrowers, however, report that when the primary borrower fails to pay, servicers and debt collectors threaten to collect protected benefits.
Student loan-related issues also are affecting older Americans’ physical health, according to the report. Older borrowers are more likely than those without outstanding student debt to skip necessary healthcare expenses, such as prescription medicines or doctor visits, because they cannot afford them, the CFPB found.
Policymakers should consider how potential policy changes and market shifts, including changes to the availability of borrowing and repayment options, can affect older consumers’ long-term financial well-being, the CFPB said in the report.
The bureau also has published tips to help older borrowers navigate common problems with their student loans.