Older People Are Burdened With $260 Billion Of Crippling Student Debt In Retirement In The US
Imagine not being able to pay off your student debt when you're 60!
Many of us wonder what we’ll be doing after we retire. Will we even ever retire? Maybe the boredom and restlessness will mean we’ll keep a job. But according to reports from the Federal Reserve, many of us need to have a job as we still have student debt in retirement.
Nearly 3 million adults in the USA are still shouldering student debt over the age of 60. This is four times higher compared to 2005 and the numbers only indicate this is a growing trend.
Even though the number of people who have debt quadrupled, the amount owed is nearly ten times higher. In 2018, $260 billion is owed in student loans, compared to $36 billion in 2004.
Many Americans aren’t financially prepared for retirement, such as 76-year-old Seraphina Galante. She joined an advocacy group for borrowers called Student Loan Justice.
She returned to graduate school in her 50’s to complete a social work degree, borrowing $35,000 in the process. Despite making regular payments for two decades, she owes close to $40,000 due to the 8% interest.
When we grow older, we want to be able to live without financial burden. Yet if we fail to prepare for our retirement, it can lead us to make difficult choices and cause additional stress. This is especially true since life can throw unexpected situations our way. Take Steven Eads, who borrowed $25,000 to complete a Bachelor’s degree in Geology, followed by a Master’s degree in Environmental Science during his 30’s. Unfortunately, the financial crisis in 2008 forced him to file for bankruptcy and was left without a home.
His son was diagnosed with cancer shortly after, which made him retire early to care for his son.
Steven put his loans into several forbearances – which means temporarily delaying the payments as agreed with the lender. However, the 71-year-old carried $60,000 in debt in retirement, which is double what he originally took out as a loan.
He doesn’t blame the lending services for his predicament, but he feels it is “difficult” to solve his situation because ” it feels like the people who service the loans are putting obstacles in front of you”.
He doesn’t even go on holidays to minimise his expenditure.
One of the ways to avoid having debt in retirement is to prepare your finances when you’re younger. These stories are increasingly common now. So if you want to avoid facing the same situations, here are three ways to avoid taking debt in retirement.
It is increasingly common for people to take out debt consolidation loans. This helps you settle all your debts into one single payment at a reduced interest rate, compared to paying for each loan separately. This can make life a lot simpler since you only worry about one payment! But many banks tank into consideration your credit history, so your interest rate might not be a lot lower.
Some banks actually offer a slight reduction in the interest rate by 0.25%-0.50% when you sign up for auto-debit. This means the payment will be taken out at regular scheduled monthly times. If you know your salary allows this, it might help in saving in the long run.
If you’re at university now, consider working part-time for some additional income. Or if you already have a 9-5 job, there’s nothing wrong with starting a side hustle for some extra cash that can go towards paying off your debt. And even better, the side hustle might blossom into something that you can do full time that is more profitable than your current job!
More and more of the older population take debt in retirement. Avoid this happening to you by taking action now!
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