Sometime in the past year, Americans’ student loan debt topped $1 trillion. That’s more than credit card debt, more than car debt, more than any kind of debt in the U.S. other than home mortgages. And contrary to popular perception, student loan debt isn’t just a problem for recent graduates. In fact, a third of all debt-holders are over age 39, and some are even carrying student debt into their retirement years.
By some measures, older borrowers are having the hardest time keeping up with their student loan payments. A recent report from the Federal Reserve Bank of New York found that almost 12 percent of borrowers in their 40s are 90 days or more behind on their payments. For debt-holders in their 50s and older, the delinquency rate hovers around 10 percent. For 20-somethings, that rate is only about 6 percent.
Older borrowers have lots of different stories to tell. Some have been paying off the same debt for decades. Some took out money to finance their children’s education. Others went back to school later in life.
Paul Moe, of Edina, Minn., was one of those returning students. Moe had always wanted to be a lawyer, and on his 50th birthday, he decided to go for it. “I liked the idea of law school,” Moe says. “It was something I had been mulling over since my 20s. … Hitting 50 years old, that was the trigger that said, ‘Okay, if you’re going to do this, do it now.’”
Moe quit his job as an adjunct business professor, took out $57,000 in federal student loans, and entered law school at Hamline University in nearby St. Paul, Minn.
He could have sat down with a spreadsheet and calculated how many years, and how much income, it would take to pay off those loans – but he didn’t. Moe figured that his credentials were strong and he had already had a successful career; with a law degree, he could do anything.
At his law school graduation, Moe’s brother asked him how he felt. “I looked at him and I said, ‘I think I just won the lottery,’” Moe says.
“I was just flying. I was on cloud nine. [But] a year later, not so much.”
After he graduated with a law degree, Moe couldn’t even get an interview at any of the firms where he applied. He went into private practice but had trouble attracting clients.
He never made more than a couple thousand dollars a year, and even with a $2,000 monthly military pension, he fell behind on his payments.
His interest ballooned; collectors came calling, and nearly 20 years later, at age 69, he’s in default.
“So what started out as a simple $57,000 loan became $75,000 and then $85,000, and then $95,000, and currently I owe $158,000,” he says. “I chose to follow and do something that I had wanted to do. And that has presented me with a lifelong problem that is never going to go away.”
Student loans– unlike most other forms of debt – generally can’t be eliminated by declaring bankruptcy, and so borrowers like Moe can be stuck with debt until they die.
Today the government withholds 15 percent of Moe’s Social Security checks as payment on his loans. He’s one of more than 115,000 retirees whose Social Security income is being reduced this year because of federal student loan debt.
New laws have offered some relief recently for borrowers of all ages. In 2007, Congress passed loan forgiveness programs for public service employees, and in 2009, a new policy allowed low-income people to pay on a sliding scale.
But for older borrowers whose debts have grown unmanageable, these programs aren’t providing much relief.
Kathy Allen, of Bozeman, Mont., went back to school in 1988 as an older student with four children. She took out about $45,000 dollars to pay for undergraduate and master’s degrees in counseling. “You figure, okay, well yeah, I’ll be able to pay these back,” she says. “This is not that much money.”
But after Allen graduated, her husband went on disability, her marriage fell apart, and she was left as the sole breadwinner caring for her children. She took a forbearance on her loans for a few years – which meant she didn’t have to make payments – but at 8 percent interest, her debt burden added up quickly. By the mid-2000s, her debt stood at $77,000. And though she’s had a secure job at a counseling center for the past 13 years and she’s been making steady payments for more than a decade, she still owes $77,000.
Allen’s hoping to qualify for public service loan forgiveness in a few years. But she worries that at age 60, she hasn’t been able to save anything for retirement because she’s been too busy making payments on her education. “You know, looking back on all this, I know that the predicament I’m in is the result of choices,” she says. “And I take full responsibility for my choices. I can’t tell you how grateful I am for my education. But in some ways it was a blessing and a mistake.”
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