Saturday, September 13, 2014

Student Debt Burden


JANET LEE DUPREE, 72, was surprised when she received her first Social Security benefits seven years ago. About one-fifth of her monthly payment was being withheld and she called the federal government to find out why.
The woman, who is from Citra, Fla., discovered that the deduction from her benefits was to repay $3,000 in loans she took out in the early 1970s to pay for her undergraduate degree.
“I didn’t pay it back, and I’m not saying I shouldn’t,” she said. “I was an alcoholic, and later diagnosed with H.I.V., but I’ve turned my life around. I’ve been paying some of the loan back but that never seems to lower the amount, which is now $15,000 because of interest.
“I don’t know if I can ever pay it back.”
She is among an estimated two million Americans age 60 and older who are in debt from unpaid student loans, according to data from the Federal Reserve Bank of New York. Its August “Household Debt and Credit Report” said the number of aging Americans with outstanding student loans had almost tripled from about 700,000 in 2005, whether from long-ago loans for their own educations or more recent borrowing to pay for college degrees for family members.
The debt among older people is up substantially, to $43 billion from $8 billion in 2005, according to the report, which is based on data from Equifax, the credit reporting agency. As of July 31, money was being deducted from Social Security payments to almost 140,000 individuals to pay down their outstanding student loans, according to Treasury Department data. That is up from just under 38,000 people in 2004. Over the decade, the amounts withheld more than tripled, to nearly $101 million for the first seven months of this year from over $32 million in 2004.
While older debtors account for a small fraction of student loan borrowers, who have accumulated nearly $1 trillion in such debt, the effect of owing a constantly ballooning amount of debt but having a fixed income can be onerous, said Senator Bill Nelson, Democrat of Florida, chairman of the Senate Special Committee on Aging.
“Those in default on their loans can see their Social Security checks garnished, leaving them with retirement income that leaves them well below the poverty line,” he said at a committee hearing this week to examine the issue.
“Some may think of student loan debt as a young person’s problem,” he said, “but, as it turns out, that is increasingly not the case.”
That is the problem that Rosemary Anderson, 57, described to the committee. The woman, who is from Watsonville, Calif., has a home mortgage that is under water, as well as health and other problems, and $64,000 in unpaid student loans. She borrowed the money in her 30s to fund her bachelor’s and master’s degrees, but fell behind on her student loan payments eight years ago.
As a result of compound interest, her debt has risen to $126,000. With her $526 monthly payment, at an 8.25 percent rate, she estimates that she “will be 81” by the time it is paid, and will have laid out $87,487 more than she originally borrowed.
Mrs. Dupree, in a telephone interview, said she, too, needed some relief. As a part-time substance abuse counselor for a nonprofit based in Ocala, she said she could barely afford the $50 each month that she negotiated with the federal government as payment for her growing debt.
She is supporting a measure introduced by Senator Elizabeth Warren, Democrat of Massachusetts, and a committee member, that would allow people who borrowed money for education before July 2013 to refinance at current, lower interest rates.
A person who took out an unsubsidized loan before July of last year “is locked into an interest rate of nearly 7 percent and older loans run 8 percent to 9 percent and even higher,” Ms. Warren said. The measure would lower the interest rate to 3.86 percent for undergraduate loans and a little higher for graduate and parent loans.
But the future of the bill is unclear. It was stalled in the Senate in June by Republican senators, like Lamar Alexander, of Tennessee, who said college students didn’t need a taxpayer subsidy to help pay off a student loan. “They need a good job.”
The measure would help 25 million people refinance their student loans, but impose a tax increase on people making over $1 million — which Senator Mitch McConnell, of Kentucky, the majority leader, labeled a “tax increase bill styled as a student loan bill.”
Adam Brandon, executive vice president of the conservative organization FreedomWorks, which opposed Senator Warren’s bill, said such legislation “only makes the current student loan bubble worse by continuing to encourage people to take out more loans than they can afford.
“The market needs to work out who can afford these loans. We shouldn’t be trying to game the market and have people end up with so much debt they can’t afford their car payments.”
Even though the number of retiree debtors is small, $1,000 deducted from their Social Security payments “can make a real difference for affected senior citizens or disabled adults surviving on Social Security,” said Sandy Baum, a professor at the George Washington University Graduate School of Education and Human Development, and a researcher at the Urban Institute.
For most beneficiaries, she said, “the average monthly payment of $1,200 is the primary source of income.” While the government should be holding student borrowers to account for their debt, “and there may be some who just decide not to pay,” she said “most are people who are not earning money so it doesn’t make sense to ask them to pay.”
As the ranks of retirees grow, more attention is being focused on the education debt incurred by the next group of people approaching retirement, those 50 to 64 years old. A 2013 AARP study of middle-class families found that aging households were carrying increasing amounts of debt.
While mortgages account for most of that debt, education debt levels have been rising for the preretiree group, noted Lori A. Trawinski, a director at the AARP Public Policy Institute.
“As of 2010, 11 percent of preretiree families had education debt with an average balance of $28,000. Growing debt burdens pose a threat to financial security of Americans approaching retirement, since increasing debt threatens their ability to save for retirement or to accumulate other assets, and may end up leading them to delay retirement,” she said.
The Government Accountability Office warned this week about the growth of educational debt among seniors. It released a report that relied on different data from that used by the Federal Reserve Bank of New York, but nonetheless painted an ominous picture of lingering debt burden.
“As the baby boomers continue to move into retirement, the number of older Americans with defaulted loans will only continue to increase,” Charles A. Jeszeck, the G.A.O. director of education, work force and income security, testified at the hearing. “This creates the potential for an unpleasant surprises for some, as their benefits are offset and they face the possibility of a less secure retirement.”
More than 80 percent of the outstanding balances are from seniors who financed their own education, the G.A.O. report concluded, and only 18 percent were attributed to loans used to finance the studies of a spouse, child or grandchild.
But the default rate for these loans is 31 percent — a rate that is double that of the default rate for loans taken out by borrowers between the ages of 25 and 49 years old, according to agency data.
“Such debt reduces net worth and income and can erode retirement security,” Mr. Jeszeck said. “The effect of rising debt can be more profound for those who have accumulated few or no financial assets.”
And such student loan debt “can be especially problematic because unlike other types of debt, it generally cannot be discharged in bankruptcy,” he added.
As a result of unpaid student debt, Social Security payments can be reduced to $750 a month, which is a floor Congress set in 1998. Senator Susan M. Collins, Republican of Maine, and a member of the committee on aging, said she was planning to introduce a measure to adjust the amount for inflation “to make sure garnishment does not force seniors into poverty.”
For people like Ms. Anderson, help cannot come too soon.
“I incurred this debt to improve my life,” she told the committee, “but the debt has become my undoing.”
(NYT)

17 comments:

Doris Da Silva said...

It is devastating to learn that so many American senior citizens are in debt due to unpaid student loans. But what is incredible is that part of their social security check (primary source of income) is being withheld to repay student loans putting some of these people below the poverty line. That is outrageous!! This issue needs an immediate action, not only for current debtors but also for the future debtors that might have to face this problem.
As a college with outstanding student loans, I’m conscious of my obligation to pay back my student loans. However, I can’t predict the future and the obstacles that might make me default in my loan repayment and keep me from paying it off before retirement time. It is scary to think that I could reach the retirement age and still have outstanding student loans at a rate that might make it impossible to pay off.

Brenden Wisnewski said...

This article is shocking. As a current college student paying a ridiculous amount a year, these are some pretty scary statistics. The elderly are struggling paying back student loan debt and the government is witholding money from their social security to pay it off, and this is causing the elderly to fall below the poverty line, ridiculous. Also you have to put in perspective that people in there 60's now paid much less for college back in the day. With the price of college tuition now being extremely high, how are we going to end up when we are 60 years old? I think that the comments by Lamer Alexander of Tennessee are fairly ridiculous when he says the only way to avoid student loan debt is to get a "good job". Sorry Alexander, but not everyone can be a rich politician like you. Also these interest rates are very high at 8%. You're going to end up paying much more than what you initially deposited. This article is frightening for current college students and the US government needs make changes to student loans to make them more affordable, or else everyone will still be paying off loans when we are in our 60's.

Anonymous said...

I had no idea that if someone could not pay off their student loans in their younger years, that when they retire and receive social security they would have to surrender even that to the banks that they borrowed money from to improve their quality of life.
I am lucky, when I was born my grandfather started setting aside money for me for college education, and when it came time that I go to college he and my parents fought over it. My parents wanted the money that my grandfather had saved to be used to buy something for me for when I graduated college, not to pay for that education that none of my grandparents truly received.
In the end my parents had saved and invested, and they set aside enough money so that if I desire to go even for a PHD, there will be no worry as to where the money comes from.
Very few people are this lucky, my response to this luxury is to work to the best of my ability and use my resources. I am terrified for my friends who have student loans that are the first several years salary once they start working.
I will not know these burdens, but something my mother wants to do is pay for her close friends daughter to go to community college, she is even thinking of offering the car I use now to help her. To think that without my mother thinking of her friends daughter, there is a possibility that she could not even go to college because the money is not there.
But a scary truth is that this will not get better because of the banks or the government. It will take a long time and decreasing students going to school for the government to lower the rates at which they charge student loans. That is a terrifying future to think about. Along with the level of education necessary for entry level positions in the jobs that are offered today.

-Beverly Levine

Anonymous said...

Marissa Cotroneo said...
This is honestly ridiculous. The fact that over 2,100,000 people in America are trying to pay off their loans from college is insane. We all spend thousands of dollars a year to get a higher education that will prepare us for a well paid job that we enjoy being at. But now a days you end up graduating college with a degree that gets you a job, sometime if you lucky, that makes it impossible to live on your own and pay off all of your loans from college. It definitely does not help that the government is putting such a high interest rate on these loans. The crazy part is that I thought that this was only an issue with our generation, but that is not the case. Even people from the baby boomer age are still swimming in debt. All of these unpaid loans and debt are messing with people's retirement income. It is forcing people to retire later in their years. This is honestly not the way that it should be. Our government is trying to put an emphasis on education, meanwhile it is causing a lot more problems. The government should lower the interest rate and find a way to help people who are in such bad debt due to their college loans.

Brittany King said...

This article discusses the rising issue of student debt and its vast increase throughout the years. Today student debt is rising due to increases in college tuition. These increases have made the price of getting your degree and fulfilling your education seem unbearable. Being a current college student and seeing the statistics that show those in their 60s still owe and are paying off student debt, makes me wonder how much todays generation will be in debt as current tuition prices continue to rise.
In addition, the article talks about the policy looking to be put in place by Senator Elizabeth Warren of Massachusetts. I agree with Senator Warren that the interest rates on student loans should be decreased in general because they are so dramatically high. But I do not believe in her proposal to replace the interest that the country would lose by taxing people who earn over a million dollars. How much can we possibly tax the rich before there are no rich people left in the US? The concept of redistributing wealth is not working for this country. How many companies and wealthy people have to leave the country before we realize that this concept is not working for us? If everyone is to be given everything where is the incentive for anyone to excel? I believe that the government needs to address student loans and provide incentives for people to become educated.
I do not believe that Senator Warren’s policy would resolve any of the student loan debt issues. It would only benefit those that took out a loan before July of 2013, which doesn’t fix the problem of increasing tuition and loan debt for those that enrolled in college after July 2013 or are currently enrolling. I understand that the elderly now contain more debt than others but do not feel bad for their rising numbers. They have had years upon years to pay off their debt. Those collecting due to a disability or an illness should be helped in aiding their debt but those receiving Social Security because they wanted to retire as soon as they could and not continue to work to pay off student loans should not. In conclusion, there doesn’t seem to be an end to rising student loan debt. The only way to stop student loan debt from accumulating is to pay your payments on time.

Aedjet Simoy said...

Today, college students are in huge debt because of high tuition pay and after reading the article, the article gave me a disgusting outlook on how outrageous the student loan can be. It feels like student loan is mandatory in order to go to any colleges around the world, families below the poverty line are ones who are mostly affected by the student loan issue and those who are lucky enough to be the 1% of our society does not have to worry about this issue. Thinking about the amount student loan an average college student can have, is monstrous because it can last for a lifetime and it is most likely impossible to pay off. According to the article, "..an estimated two million Americans age 60 and older who are in debt of unpaid student loans...", this statistics is horrifying because of the fact that there are still paying off their student loan after their retirement. Paying off student loan looks impossible to pay off because of the tremendous amount it has and at the end of the day, the only question an average college student have is "How will I pay off these student loan?"

Vinona Rugova said...

As a college student this worries me a lot. My loans seem so minute right now but I know that when I need to start paying them back , they will put a huge burden on my life. I hope that I will be employed right out of college so that I can begin to pay off the loans. A life in America , makes it seem like we will work hard and all the work will pay off and then we can retire and relax and still receive money. If social security is eliminated or if it is capped at a smaller amount then most people will not have the means of supporting themselves and their families. We simply can't tax the rich and think that they will take it with open arms. In order to reduce debt , interest rates need to be lowered and people need to get more scholarships and aid. The future doesn't look bright for social security.

Nick Leader said...

It is tough thinking about how there are so many people who are retired still trying to pay off their student loans. It makes me think on how my generation will be and how much higher the overall debt because of student loans will become. I am a bit lucky because as of right now I didn't need to take any student loans. My family put aside enough money for me to go to college without needing student loans. If I go for my masters or even farther that is a different story. As of right now though I do not require student loans. I am thankful for my parents for that reason because I now see how so many people are struggling to pay them off even though they are retired and are in their 60's and even 70's. It is absolutely ridiculous how high the interest rate is for student loans. The longer it takes for you to pay off these loans the more you owe. Rosemary Anderson as an example in the blog will have to pay an extra $88 thousand dollars due to the interest rate. There are so many people who are in debt and the number is growing everyday.

-Nicholas Leader

Anonymous said...

The number of people in America today who are getting up in age and are still struggling with student loan debt is staggering, as suggested in the article. I believe that a major factor of why these people are still in debt is because they did not find steady jobs coming straight out of college. This could and probably will be a big challenge for us all after we graduate and it could lead to substantial debt from student loans. Another reason some of these people are still in debt is because they did not have their priorities straight when they graduated from college. For example, one of the women said she was an alcoholic before turning her life around. Although it is admirable to make a change in her lifestyle, if she never started with being an alcoholic, she would have a much better opportunity of getting a job and going to work and not being in debt now as a result. Debt from student loans can be very worrying and intimidating and I hope to not be in the situation of some of these people in the article by working hard and graduating on time.
-Nick Bellantese

Matthew Kurdewan said...

This article is a real eye opener especially because I am a current student in college. It is amazing that people are in their eighties still having to pay their student loans off. What started for them as only a couple thousand dollar loan turned into a non payable amount of money because of the interest that has accumulated over time. Money is being taken out of their social security to pay for the debt. The social security money these people receive are what they survive on and by losing that it puts them in a very difficult situation. The scarier thing to me is that these loan were only a couple thousand dollars with lower interests rates, nowadays the loans needed are higher and the interest rates have also risen. The main point I have taken away from this article is to pay off your student loans as soon as possible, because they can snowball on you very quickly when you let them sit and gain interest.

Alexa Lauro said...

I believe that is this is unethical. Being that I’m a college student and have taken out student loans this makes me extremely anxious. With the price of education, I’m pretty sure I will be paying off my student loans for a very long time. But thinking about paying them when I’m in my elderly years makes it even more stressful. The woman from the article, Janet Lee Dupree was diagnosed with H.I.V, and I’m pretty sure she had outstanding medical bills. On top of her medical bills, her social security payments, which are probably her main source of income, are being cut down dramatically. Something needs to be done, and in a timely manner.

Domenick Luongo said...

I find the student loan crisis that former and current college students are facing is very alarming. I am a current college student with outstanding student loans and the mere fact that these loans could be loaming over my head until my retirement is very daunting to me. This article is very enlightening of so many former college students that have ran into trouble and are now facing the consequences of their debt. This article also brings to mind the recession the economy suffered from the defaults with the housing loans. These students loans are a problem we that will not go away anytime soon. I believe the current interest of rate of these loans need to be lower for the sake of all college students and the economy. The system that we have today is not doing a proper job of handling this massive debt and needs more attention not only from the government but also college students.

Aly Rafeh said...

As I was reading this article I was shocked. I was very surprised that so many people in their 60's-80's owe so much money in just student loans. I was also surprised that the amount of money owed in loans increased substantially from 2004 until now. The article mentioned that in 2004 the dbt was 32 million (which is still a lot) to 101 million this year. As a current college student I am very thankful that both my parents and my grand-parents out money aside ever since I was born for college. If I were to ever have to get a student loan, I will be sure to do my best to pay it off as soon as possible.

Anonymous said...

It is honestly very heartbreaking to learn that there are americans going into their golden years and are still tagged onto the student loans that they took out in their college years decades before. Even if someone in their mid 60s have paid off their student loans, in todays economy, it is common for grandparents to take out student loans or cosign for student loans in their lifetime. The obvious point is that there are not enough good jobs for people to be able to pay back their child support. You stop and think these people have decades t pay back this money so there is no excuse. That is not the case for these people. People like this work their whole lives only making enough to pay the bills, with interest, it is very difficult to be able to pay the large amount of student loans that we all are required to pay off.

Katherine Haas

Stamyr R said...

This article informs the readers about the increasing problem of student debts. Surprisingly, student debt issues are mostly among elderly seniors in the age range of 60 and older. It is a common burden in America for those who took out loans in order to pay their college tuition. Many elderly people shared in this article the struggle they had to face in order to get by paying off their loans whilst dealing with the spontaneous crises' and issues life throws at them such as unemployment, injuries, and etc. Senators stand on both sides of this issue; Senator Elizabeth Warren, the Democrat of Massacussetts has an idea that would permit people who borrowed money previous to July 2013 to "refinance at current, lower interest rates" but then there are senators, mainly Republican senators who see this as a bad notion. Senator Lamar Alexander of Tennessee believes it has more to do with the college student's need for a good job than their need for a taxpayer subsidy. I agree with the general Democratic view on this issue mostly because it is not simple to receive a high-paying job that would help you keep up with your bills, basic needs as well as your debt. American's need extra help in order to get by and get out of this growing issue. One major issue of student debt is that it poses a threat to financial security of retirement. In the long run American's won't be able to put money towards their needed retirement funds and will suffer due to that later. Since student loans cannot be discharged in bankruptcy the American people are trapped, and that is not the freedom and liberty that Americans should have. The burden of student debt is a threat to laissez-faire which I feel is wrong and I think the government should help people in paying their debts. People take out student loans to receive a good education in order to receive a good job so in which they will be able to be financially secure. It's an ironic thought to think that the major factor that should help Americans reach financial stability is the reason that they are not financially stable. Seniors should not be in poverty and it is time for the government to step in.

Anonymous said...

Bryan Rivers
The fact that student loans is still a problem today is very alarming. Janet Lee at the age of 72 is dealing with a problem that kids today are dealing with. It is a huge issue that needs to be taken care of because if it is not then people that have taken the loans out will never recover. The money that they receive will not amount to enough and will result in these people living in poverty. Is school worth the debt? That is the big question, can school help pay off the debt pilled up from these universities and banks to provide a life for the student. Interest rates on these loans make it even harder to pay back. In rosemary's case she had to pay 87,000 more dollars than she originally withdrew. School is an investment that should potentially fund the rest of peoples lives. Now school is going to be tested as if to how important it is to young adults today. The government has to do something about the student loans or it will be a problem that will keep on occurring. As the prices of universities are constantly rising there will be no help for the students.

Alex said...

I would love it if student loan forgiveness applied to me. I am graduating in a year and I'm afraid of the debt. I currently don't have a job to pay the minimum payback amount.
Student Loan Forgiveness Program