I have written before in our blog on my perceptions of the coming “retirement crisis” facing Kentucky. As taxpayers, we may finally be given a miniature step towards transparency if Senate Bill 3—a bill to disclose Kentucky legislators’ retirement benefits—passes. However, another issue that too few people are talking about is the intersection of the baby boomer retirement crisis and the student loan crisis in our country.
Get ready and be forewarned.
The Consumer Financial Protection Bureau (CFPB) recently issued a report on the growing number of older borrowers with outstanding student loans. Most of us can attest to the efforts of so many parents and grandparents who have assisted their children and grandchildren in paying for a college education. This is a very worthy goal, and something most of us want to do. Yet, tuition and higher education costs keep rising, year after year after year, without fail, and as of 2015, nearly 40 percent of borrowers age 65 and older were in default on federal student loans.
Please be aware and share the information that the federal government can and will seize both social security benefits as well as tax refunds to offset against defaulted and unpaid student loans. Yes, that’s right. According to a report from the Government Accountability Office, the number of student loan borrowers, over age 65 and losing out on a portion of their Social Security benefits increased 540% from 2002 to 2015. Think of the implications to those on a fixed income who suddenly wake up to find social security payments being held to pay some long ago student debt. While most other creditors, including private student loan lenders, can’t touch social security, our federal government can for any other kinds of debts that they allege you may owe to them.
The CFPB Report states grim statistics: that the number of people age 60-plus with student loans quadrupled from 2005 to 2015, from 700,000 to over 2.8 million people. The amounts of the loans doubled over the same time period, and the total owed by all those age 60 and older exceeds $66.7 billion in 2015.
While the goal is worthy, children do not want to see this happen to their own parents and grandparents. One way to prevent garnishment is to be proactive and seek income based repayment options through the loan servicer. The CFPB recommends student loan borrowers get advice on student loan repayment options by using the CFPB’s Repay Student Debt tool. “This interactive resource offers a step-by-step guide to navigate borrowers through their repayment options, especially when facing default. Student loan borrowers experiencing problems related to repaying student loans or debt collection can also submit a complaint to the CFPB.” For information on private student loans there are various payment options as well which many people may be unaware exist.