Seniors Have Student Loan Debt Too
The faces of student debt in America are aging. While you may associate student debt with current students and recent graduates, almost every demographic is burdened with student debt. The Wall Street Journal reports Americans 60 years and older owe a collective $86 billion in student loan debt. From 2010 to 2017, the average student loan debt owed by a senior has surged 44% to a level of $33,800. According to TransUnion, total student debt for this demographic is up 161%, the largest increase of any age group.
Americans over 60 owe student debt for their children, others for themselves, and some may owe a combination. Much of the growing student debt problem is due to problems brought on by the Financial Crisis of 2007-2008. After the Financial Crisis, many Americans lost their jobs, savings, and faced other financial hardships. This led to many income college students having to rely on student loans to attend college.
In some cases, student loans were not enough to cover the cost of college because the Federal government caps the loan amount that undergraduate students can borrow. Stricter lending standards made it harder for new college students without a credit history to secure a private loan. Thus, parents had to cosign on private loans with students or take out “parent student loans” because they did not face the caps. During the 2017-2018 school year, the federal government disbursed $12.7 billion in Parents Plus loans. The average amount owed in Parent Plus loans at the time of the students’ graduation has more than tripled since 2000. Parents of students owed on average an estimated $35,600 when their child graduated.
Many Americans who lost their jobs, chose to go back to school to finish degrees or earn higher degrees to open up more employment opportunities. Tuition costs increase as students continue from undergraduate to graduate study.
Student loan debt has many negative impacts on the borrower. Sometimes the borrower is unable to afford the debt payments and has to take on additional personal loans or credit card debt to afford daily expenses. If the borrower is old enough to be eligible for social security benefits, they may have these benefits garnished to repay the student loan debt. Student loan debt can also increase the debt-to-income ratio and make it harder to secure other lines of credit like mortgage debt.
Because student debt is so common, many mortgage lenders will work with student loan borrowers to find a manageable mortgage solution. If you have questions about how your student debt will influence your ability to qualify for a mortgage, please let me know.
Sources: The Wall Street Journal