Abelson, who lives outside Ocean City, Maryland, was afraid to quit her job and rely on Social Security because the federal government can withhold part of her monthly paychecks to pay off the debt. But the federal student loan debt relief plan announced by President Joe Biden in late August gave Abelson new hope. Although she hasn’t checked her balance lately, she believes it will wipe out what she owes. She has already been asked to be notified when she can apply for forgiveness and has taken the first step to sign up for Social Security benefits. “Because I know this is coming to an end, I actually started the Social Security claim process the day after Biden announced it,” Abelson said of the debt relief plan. “I am more than grateful.” There are nearly 9 million federal student loan borrowers like Abelson who are over 50. They represent nearly 20% of the roughly 43 million federal student loan borrowers. And the number of older borrowers with student loan debt has increased. About 1.6 million more borrowers over 50 have federal student loan debt now than in 2017, according to federal student loan data. Not every older borrower will be eligible for Biden’s student loan forgiveness. Their income must be under $125,000 a year (or $250,000 for couples) to be eligible — the same income limit for all borrowers. Borrowers must also have federal loans. Excludes private student loans. Eligible borrowers can see up to $10,000 of their student debt written off. Those who received a Pell Grant while enrolled in college are eligible to have up to $20,000 forgiven. Pell Grants are awarded to millions of low-income students each year, based on factors such as their family size and income and the cost of college. There are several reasons why more older borrowers are still paying off student loan debt. Some took out federal student loans to help their children pay for college, the price of which has risen faster than inflation, while others may still be paying off debt from their own education. And if borrowers default, they could lose some of their Social Security benefits. In 2015, the latest data available, the government reduced Social Security checks for a total of 173,000 Americans of all ages, a 380 percent increase from 36,000 in 2002. Among those over 50, three-quarters owed loans for their own education alone, and most owed less than $10,000 at the time of initial Social Security. Nearly 40% of federal student loan borrowers age 65 and older are in default, according to a 2017 report from the Consumer Financial Protection Bureau.
Some parents borrow to help their children pay for college
Parents can apply for what’s called a Parent PLUS loan from the federal government to help their children pay for college. About 3.6 million people currently have outstanding Parent PLUS loans, totaling more than $107 billion, according to government figures. Parent PLUS loans were first made available in 1980 and are intended to fill the financial gap if the student’s loans do not pay for the full cost. Parent loans typically have a higher interest rate than federal student loans, and payments must be made while the child is still in school, unless the parent requests a deferment. When James and Mary Stone took out federal Parent PLUS loans to help their two sons afford college decades ago, they didn’t think they’d still be saddled with debt in their late 60s. The North Carolina couple still owes $29,000, even though they’ve been making payments for years. Just before the pandemic began, they were sending about $400 a month as part of an income-based repayment plan. After Mary Stone lost her webmaster job last year, they sold their house and rented a smaller one so they could retire. Forgiving at least part of that debt would be a big relief for the Stones, especially since James Stone was diagnosed with cancer in May. The couple doesn’t yet know how much their treatment will cost, but a smaller monthly loan payment will give them more room. “It will mean I can devote my time and energy to taking care of my husband’s needs at home, instead of taking a low-paying job to help pay off this loan,” said Mary Stone, noting that the sons her still struggling with their own student loans from college.
Some student debt balances explode over time
If borrowers stop paying their loans, the balance continues to grow due to interest. Unlike other debts, it is very difficult to discharge student loan debt in bankruptcy. Franco Tombertrini is grateful that $10,000 of his student loans will be forgiven, though he wishes it were more, as his balance has ballooned to $88,000 in the 25 years since he finished college. A U.S. Air Force veteran who served in Operation Desert Storm, Tompeterini took out about $34,000 in loans so he could earn a degree from American National University after leaving the military. After making monthly payments for a few years, Tompeterini had to move home to care for his elderly parents. Unable to find work in his field, he took a higher-paying one and let his loans default for about a decade before entering an income-based repayment plan about 15 years ago. But the payments didn’t even cover the full interest, much less the chip in the principal. So the amount he owed just kept growing and growing. The government offers several income-driven repayment plans that lower monthly payments for borrowers who are struggling to repay their loans. Generally, an income-based program limits payments to 10% of a borrower’s discretionary income. While lower payments help borrowers stay out of default, their monthly payment may no longer cover the interest that accrues each month. In this case, the total outstanding debt continues to grow. Biden plans to propose a new income-driven plan where the government would cover unpaid interest. Tombertini’s student loan debt prevented him from buying a house or putting money in the bank. “I really don’t have a future,” said Tompeterini, who lives in Rogers, Arkansas and works as a property manager. “At age 60, I should be thinking about retirement and what I’m going to do. Now I’m probably going to have to work until I die. And I’m still going to have student loans that are going to be due. They’re going to be written off eventually after I’m over it.” . CNN’s JiMin Lee contributed to this story.
