Ballooning student loans become an albatross; ex-NYU law student, 91, owes $329K on initial $29K loan
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Some older Americans who took out relatively modest student loans are finding themselves saddled with ballooning loan balances that can result in garnishment of tax refunds, wages and Social Security payments.
The New Yorker has a story on the issue that includes interviews with older people whose debt is emblematic of the problem.
“In an era of declining wages and rising debt, Americans are not aging out of their student loans—they are aging into them,” the article reports.
One person struggling with student debt is identified only as Betty Ann. She enrolled at the New York University School of Law at age 52 in 1983. Later, she worked for about 30 years at a nonprofit that paid her close to the minimum wage.
Betty Ann took out about $29,000 in federal loans but owes $329,000 today at age 91.
“Mounting interest, looming balances, faulty relief methods and declining wages all force borrowers to carry loans for longer and longer, pushing student debt across generations,” according to the story.
The story cited these statistics:
• People age 62 and older are the fastest-growing group of student borrowers. In 2015, more than one-third of borrowers in that group defaulted on their loans.
• One out of five of the 45 million Americans with student debt are older than age 50. Student loan balances for the older-than-50 group increased by 512% between 2004 and 2018.
• One-third of older student borrowers took out the loans for children or grandchildren under a program called Parent Plus that often carries “punishing terms, such as significantly higher interest rates and scant options for relief.”
One debt-relief program called income-driven repayment, which expanded during the Obama administration, has good and bad aspects. On the plus side, the program allows borrowers to make monthly payments that are based on their income and to have their loans canceled after 20 or 25 years of payments.
But the lower loan payments “allow interest to fester and capitalize, swelling balances to amounts far greater than the original,” the article reports. And because of bookkeeping problems, debt cancellation “has proved to be mere mirage.” More than 4 million borrowers could have accessed loan cancellation as of 2021, but only 157 borrowers obtained relief.
Hat tip to Above the Law, which noted the New Yorker story.