The fastest-growing segment of student loan borrowers? Not millennials, not Gen X-ers. Not even 40-somethings returning to school to learn new skills.
It’s parents and grandparents.
The number of seniors generally age 60 and older with student loan debt has quadrupled over the last decade to 6.4 percent, and the average amount they owed has also increased to $23,500 from $12,100 a decade before, according to a new report from the federal Consumer Financial Protection Bureau. The government watchdog agency reviewed data from 2005 to 2015.
Altogether, people 60 and older owed an estimated $66.7 billion in student loans, the report noted. And this is in addition to mortgage, credit card, medical and auto-related debt.
“While the key driver of debt for older consumers remains mortgages, student loans are becoming more common,” the report said
Indeed, nearly three-quarters of senior borrowers said their loans were for a child or grandchild’s higher education, compared with about 27 percent whose debt was for their own or a spouse’s education.
The rise in the number of students relying on a parent or grandparent to cover college costs coincides with the rocketlike trajectory of tuition, room and board. But the consumer agency sounded the alarm that taking out student loans to help the grandkids may hamper seniors’ ability to save for and enjoy retirement.
Interestingly, the report found that those older consumers with outstanding student loan debt have set aside less for retirement than those with no student debt.
In many cases, it can be a sound approach for older borrowers with well-established credit records to take out federal PLUS loans or co-sign on a private education loan for their child or grandchild, said Reecy Aresty, a college financial aid expert in Boca Raton, Fla.
But there’s the flip side. Seniors on a fixed income or those struggling to save for retirement “should strongly consider forgoing student loan borrowing,” said David Levy, editor of the Edvisors higher education research firm in Las Vegas.
Here are some additional tips from the Consumer Financial Protection Bureau for seniors having trouble with college debt:
▪ Social Security and other benefits are protected in instances where there’s a delinquency or default on a loan from a private lender. But benefits can be touched to help repay a government loan.
▪ Regardless of your age, if you’re struggling to repay federal student loans, consider applying for an income-driven repayment plan that can lower your monthly bill based on your monthly personal income. Enroll at StudentLoans.gov.
▪ Understand your repayment responsibilities if you co-sign on a loan for a child or grandchild. You’re not just vouching for someone’s ability to repay the loan; you’re on the hook if the primary student loan borrower stops paying. In other words, a co-signer is a co-borrower.
Parents and other family members “should never co-sign a student loan unless they are able and willing to make all loan payments,” Levy said.
▪ Co-signers are entitled to review account information, even if they are not the primary borrower.
Steve Rosen: 816-234-4879