We wrote a few weeks back about the impact of student debt on consumers. A 2018 study showed that the average college graduate took with their diploma around $29,200 in debt. The average household has $47,671. Americans, as a whole, hold over $1.5 trillion in student debt.
While our blog talked about today’s graduates, a recent New York Times article pointed to another group that’s truly struggling: Seniors.
It told us that while most borrowers were 18-39, the fastest growing segment of people struggling with student debt were those over 60.
They profiled a man named Patrick Donohue. He spent over 20 years working for AT&T, and with his wife, was looking forward to retirement. But while he graduated with around $3,000 in debt ($12,000 in today’s money), he and his wife had taken loans to put his four daughters through college.
They now owed $97,932.
Around 42 million retirees rely on Social Security to cushion them during their Golden Years. One of the links in the Times article leads to an organization called American Student Assistance. For 60 years, they’ve been a nonprofit and student loan guarantor, and their website provides a wealth of information. They point out that when Social Security was created in 1935, they mandated that no debt collector could go after this safety net – perhaps recognizing the pain many underwent during the Great Depression. That changed in 1996 when an act of Congress said most debt collectors couldn’t touch the first $9,000 in annual benefits. That’s around $750 per month. They also capped the amount that could be applied to debt as no more than 15% of one’s Social Security. But as we’ve learned, while most Social Security is still protected from creditors, some outstanding student loan debt can still be grabbed from that 15%.
At the time, that (at least) made certain that no senior relying on Social Security would fall below the poverty line because of outstanding debt. But here we are in 2020, and you would need $1,320 per month to stay above that line. But the magic number is still $750 per month.
Sadly, these elders saddled with student debt – often not their own – are often the first to default on their loans.
There are many reasons people find themselves in debt – poor planning, death of a spouse, medical crisis, student debt. We can help you plan a path towards fixing that.