TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, February 14, 2017

NY Times:  Haunted By Student Debt Past Age 50

New York Times editorial, Haunted by Student Debt Past Age 50:

The experience of being crushed by student debt is no longer limited to the young. New federal data shows millions of Americans who are retired or nearing retirement face this burden, as well as the possibility of having their Social Security benefits garnished to make payments.

Americans age 60 and older are the fastest-growing age group of student loan debtors. Older debtors, many of whom live hand-to-mouth on fixed incomes, are more likely to default. When that occurs with federal loans, as happens with nearly 40 percent of such borrowers who are 65 and over, the government can seize a portion of their Social Security payments — even if it pushes them into poverty. About 20,000 Americans over the age of 50 in 2015 had their Social Security checks cut below the poverty line because of student loans, with poverty-level benefits falling even further for 50,000 others, according to a recent report by the Government Accountability Office.

A report issued last month by the Consumer Financial Protection Bureau shows that the number of Americans aged 60 and older with student loan debt has grown fourfold over the last decade, to 2.8 million in 2015 from about 700,000 in 2005 [Snapshot of Older Consumers and Student Loan Debt]. ...

60

Some older borrowers are carrying their own education loans, but most fell into debt helping their children or grandchildren, either by borrowing directly or co-signing loans. As these borrowers age, they have increasing difficulty keeping up loan payments while also paying for food, housing, medication, and dental and medical care. ...

[The] government should do more for older borrowers. For starters, it should automatically enroll them in income-based repayment when their accounts become delinquent — but before they default. Those who have reached default should be enrolled in the rehabilitation plan, which offers affordable payments. Meanwhile, Congress should exempt Social Security income from garnishment.

 

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Comments

Quote: "Some older borrowers are carrying their own education loans, but most fell into debt helping their children or grandchildren, either by borrowing directly or co-signing loans."

This is yet another illustration of just how poorly conceived these student loans were. Co-signing for a son or daughter to buy a home is one thing. The home will almost always retain or increase its value. Signing for an often worthless college education shouldn't be permitted under similar conditions. Stick the student for their stupidity of majoring in a field that will never get them a job—yes. But don't burden their parents or grandparents with its costs.

We forget that necessity is the mother of virtue as well as invention. In college, I stayed in housing so run-down, it's probably illegal today. I cooked almost all my own meals. I scoured to save on textbooks. I burdened myself with jobs even if my grades suffered. But I managed to graduate debt free.

Today students don't have the necessity of doing that hanging over their heads. Those loans are too easy to ger. Even worse, universities are not forced by student necessity to control their costs. They can let the cost of college rise three times faster than inflation, smug and secure that the resulting student debts are not their debts.

All in all, it's not a pretty picture. There's blame enough for all involved. And I shudder to think at what the outrage will be if the government tries to stick everyone, college graduate or not, with the costs wiping out these loans.

Posted by: Michael W. Perry | Feb 14, 2017 5:27:28 AM

This is the natural result of the faltering economy, job loss, and the incessant advice of "retraining" and "retooling" that lures older workers back into the education industry. NOt always the best advice, since even if an older worker retools and goes back out into the job market with a freshly printed degree, there is significant age discrimination, with perhaps a few exceptions. Good luck getting back into the work force.

Posted by: ruralcounsel | Feb 14, 2017 6:03:49 AM

"About 20,000 Americans over the age of 50 in 2015 had their Social Security checks cut below the poverty line because of student loans."

There are 110 million Americans over the age of 50. Odds of getting your social security checks cut below the poverty line are less than 2 in 10,000.

You're a heck of a lot more likely to be pushed below the poverty line by Congress cutting your social security or medicare benefits.

Posted by: The Sky is Falling | Feb 14, 2017 8:16:45 AM

"[The] government should do more for older borrowers."

Sure, let's subsidize the improvident at the expense of the provident, bound to work, bound to be a great success - at generating more improvident tax eaters and fewer provident tax payers.

Posted by: Fred Z | Feb 14, 2017 11:57:44 AM

Did they learn anything?
Nope.

Posted by: Stan | Feb 14, 2017 12:45:19 PM

I would propose that, since the alleged purpose of student loans is to ensure that you can get a good-paying job, if you haven't paid them off by the time you are collecting Social Security, the student loans should be automatically dismissed, on the rationale that they have failed the person who used them for the education that failed.

I would further proposed that the school that provided the education should be on the hook for at least a part of the student loans at this point, under the assumption that they have failed to provide an education that would get a person a good job...

Yes, this would make governments and schools wary of providing student loans. Well, they should be. Student loans shouldn't be provided for degrees that don't, ultimately, pan out for the student.

Posted by: Alpheus | Feb 14, 2017 1:19:03 PM

@Alpheus, a minor correction needed to your excellent comment, let me help -

"I would propose that, since the alleged purpose of student loans is to ensure that you can get a good-paying job, if you haven't paid them off by the time you are collecting Social Security," that the 'student' should automatically be imprisoned for 10 years for defrauding the lender, without trial and with no appeal.

Posted by: Fred Z | Feb 14, 2017 1:39:52 PM

As a former stock boy, pizza deliverer, post hole digger, landscape laborer, busboy, short order cook, mail room clerk, bartender, gravedigger, shoe-shiner, I agree 100% with Mr. Perry.

Posted by: Mike Petrik | Feb 14, 2017 1:55:28 PM

No risk, no reward. The federal government is already making money hand over fist on federal student loans and taxes on the education earnings premium.

The government is well situated to absorb a few bad outcomes considering how well things turn out most of the time.

Posted by: reward | Feb 14, 2017 3:14:46 PM

The real responsibility lies with the colleges and their predatory tuitions, which have risen faster than the cost of living, taking advantage of student loans. The colleges provide an education of dubious worth and walk away with the money.

The government may make some kind of repayment plans, but we taxpayers are paying for it, and colleges are laughing all the way to the bank.

To pay for this we should tax college endowments on the amount of delinquent loans that each former student of that college has.

And end student loans.

Posted by: Nate Whilk | Feb 14, 2017 4:07:55 PM

My sister had a small student loan around 1970. (Under $3,000.) She was never in a position to pay it off, and around 1983, she had a breakdown and our Dad took care of it while she was under treatment (she recovered). Then last year a collection agency started hounding her for $15,000, claiming huge accumulated interest. Our Dad died several years ago, and if there was any paperwork received, it was probably lost long ago. The collectors' documents are wrong (the date of the loan is off by several years), but they don't care. To paraphrase the mob boss in "Goodfellas", "____ you, pay me."

My sister is 70, and works part time (about 1,500 hours/year), making about $20,000 gross. They just seized her 2016 tax refund of $2,000.

She's very thrifty and has managed to save a few thousand dollars; she's terrified that it will be seized too.

I do not support letting deadbeats off the hook - I paid off my student loan. But neither do I support squeezing poor old ladies based on mangled records.

Posted by: Rich Rostrom | Feb 14, 2017 5:06:37 PM

Better yet, let's just get the government out of the student loan business altogether.

Posted by: Txcon | Feb 14, 2017 6:10:21 PM

How about this. If the student is still in debt at age 50, the educational institution they went to while incurring that debt is on the hook for it. Garnish it from their endowment fund, lump sum.

Posted by: Edward Nutter | Feb 14, 2017 8:40:03 PM