When I was in graduate school, I remember having conversations with my peers about the length of time it would take us to repay our student loans. For some of us, that meant closer to our proposed retirement years. For some older adults (60 and over), the realities of carrying student loan debt continue to increase. A report from the Consumer Financial Protection Bureau (CFPB) indicated that consumers 60 and over were the fastest growing student loan borrowers between 2005 and 2015, and the amount this population owed had doubled over the ten years. Older adults borrow to cover their educational expenses and to serve as co-signers on loans for their children, grandchildren, and other loved ones. The CFPB report also indicated that the majority (approximately 73 percent) of student loan borrowers over 60 years older reported that the debt they carry is for their children and grandchildren.
While student loan debt among all borrowers affects future financial decisions, there are additional effects for older adults. Therefore, whether you become a co-signer on loans or borrow to cover your own educational expenses, it is important to understand the terms and conditions of the loan you are attaching to your credit information.
For some older adults, the main way to support their children/grandchildren's future is to co-sign on their student loans. When you co-sign on loans, you agree to take on the full responsibilities of repaying that loan if the primary borrower defaults on payments. Another important consideration relates to the type of loan (federal versus private). Students can apply for federal student loans from the government. There are needs and non-need based types of loans, but these are distributed on a first-come, first-serve basis. This should always be the first option for your student if they are eligible, as private loans typically require a co-signer. For older adults co-signing on a student loan, think about possible changes in lifestyle and other things that may affect your living situation. For example, retiring early or being on a fixed income during retirement. Co-signing on loans also means that the information will be on your credit report, which affects future loans (e.g., replace a car, taking out a new credit card).
What about me?
Borrowing to cover your educational expenses is a familiar route that many students take to continue their education. For older adults, having a reasonable repayment plan, which includes a time frame, and loan details allow them to plan for the unexpected. Below are some additional considerations:
- Do not risk or sacrifice your retirement savings, emergency savings, or risk adding multiple equity loans to your home.
- Make sure that if you are looking into loan options, that you are seeking information from the right sources such as the student loan office/officers at your educational institution.
- Consider how student loan repayment may affect your social security and other benefits have or will receive.
- Different health-related concerns can affect your financial life and ability to repay student loans. Planning for emergencies helps protect against financial shock.
In summary, student loan debt among older adults has grown significantly over the past few years. Older adults are taking on debt to pay for their children's education as well as cover the cost of their educational pursuits. As the amount that older adults increases, it is important to consider the long-term implications of having student loan debt into or close to retirement.
This article only provided a brief overview of the impact of student loan debt on older borrowers. To read the full report, please visit the CFPB website here. To read a previous article on student aid, please visit here.
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