Student loan debt crisis limits educational options for America's seniors

The article was written as per coursework at Columbia Graduate School of Journalism

New Jersey’s Ocean City is a town, like many beachfront escapes, is deemed part of the American retirement dream. It includes an old-fashioned beachfront life with high-rise condos and various bungalows. Coastal Living Magazine describes New Jersey’s Ocean City as the “happiest seaside town for retirees”.

While this is a peaceful haven for senior citizens waiting to spend their retirement savings, only few will be able to afford living in Ocean City and places similar, leaving as many as nearly three-fourth of the country’s seniors aging 60 and above buried under $85.4 billion worth of student loan debt, according to a report released by the Federal Reserve Data May 2019.

Adults over 25-years of age returning to school peaked in 2010 with aims to meet the changing job market demands, according to the Consumer Financial Protection Bureau.

“Some senior citizens are returning back to school now mainly because they want to attain certain skills to advance in their careers and others are returning namely for the benefits of learning,” said Pam Hinden, the director of the Adult Degree Program at Lehman College.

She added that many of the seniors enrolled in the program choose to pay for a class or two at a time to avoid taking loans while others are reimbursed by their employers.

The debt owed by senior citizens is part of a $1.5 trillion nationwide student loan debt crisis carried by 43 million burrowers. The loan, which makes up the second-largest component of household debt, also includes a $119-billion worth of student loans from private sources that are not sponsored by the government, according to data by Center for American Progress.

Around 15 years ago, burrowers of this age group constituted $47 billion of the entire student debt. TransUnion, an American consumer credit reporting agency pointed out that an average senior student loan borrower owed about $33,000 in 2017, a 44% increase from debt in 2010. The average monthly student loan payment ranges from $200 to $300.

Senior Americans who accumulated debt as a result of either struggling to pay off their own loans or took additional student loans to pay for their children’s education, are among the fastest-growing group of borrowers.

“Most of New York has been on debt avoidance plans, where the state offers the second highest amount of financial aid based on need and income,” said Brian Backstrom director of education policy studies at Rockfeller Institute of Government.

The numbers of parents who co-signed loans for the children’s education went up from 74% in the academic year 2008-2009 to 93% in 2018-2019. Many who took loans rarely realize that it lacks a good return on investment.

Backstrom suggested that families taking student loans should be financially literate when making choices or deciding to avoid the debt all together as part of debt avoidance or relief.

People make money choices all the time and that should not be different when selecting colleges. He explained that the whole issue of debt could be avoided by choosing a low-cost college and by investing and saving for college rather than only spending income.

Many senior adults failed to understand the consequences of late payments which resulted in their social security benefits being garnished. The government deducted the debt payment from social security benefits from around 114,000 borrowers over 50 years old and above to repay defaulted loans worth $171 million.

The offset of social security benefits have affected students enrolled at for-profit universities, where over half of students who drop out of college default on their loans within 12 years, according to the Institute for College Access and Success. Students who dropped out are likely unable to meet the wage bump as opposed to those who earned their diplomas.

Although senior citizens may be faced with little to no choice but to repay the amount of loan incurred, some programs help mitigate the burden. In 2017, New York became home to the country’s first accessible college program, the Excelsior Scholarship. The three-year program enables over 940,000 middle-class families and individuals, who earn an annual of $125,000, to attend the City University of New York (CUNY) and the State University of New York (SUNY) tuition-free.

Consequently, nearly half of SUNY students and 80% of CUNY students graduated debt-free, according to Brianstrom.

Housing specialist at University Neighborhood Housing Program, Claudette Sanes, 60, from the Bronx decided to return to Lehman College after 37 years to finish her degree in social work. She plans to use her degree to become a social worker specialized in dealing with aging groups.

Sanes never applied for a student loan and decided to remain debt free. She chose not to enroll in private universities to be able to financially help her daughter Yesina Sanchez, a mother of three children, who is burdened with an $8,000 loan debt. Around $6,500 of her daughter’s debt is comprised of only interest rates.

Sanchez currently pays $30 per month towards her student loan after arranging a repayment plan.

Sanes believes that some effective way to curb the nation’s student loan debt growth is to put a cap on the increasing interest rates. She also added that all colleges should explain the meaning of student loans and if it is the right financial choice for different individuals.

Some repayment plans have been introduced to contain the crisis, in which the government offers payment plans that are based to the borrower’s household income. While those plans permit borrowers to pay lower monthly installments and also provide them debt forgiveness after 20 years, less than 20% of borrowers participate in these plans, according to a 2019 report by the AARP Public Policy Institute.

College is currently viewed as a necessity for the marketplace now more than ever, however older adults may feel that it’s taking over their retirement plans as they pressure their investments mainly towards paying off student loans.

“I plan to apply for a master’s degree through a fully-funded scholarship after graduating but I will avoid student loans at all costs because I am 60 years old and I don’t need debt in my life,” said Sanes.