Florida Elder Law & Estate Planning Blog

Student Debt Forgiveness Could Benefit Older Borrowers, Too

Young people are not the only ones crushed with student debt. Some older people fall into this category, too. A College Board study reveals that 23% of federal student loan debt is held by those age 50 and up, as of the second quarter of 2021. The Consumer Financial Protection Bureau reports that people age 60 and over are the fastest- growing group of student loan borrowers. And according to a 2020 analysis from the National Center on Law and Elder Rights, between 2004 and 2019 borrowers ages 50+ grew at double the rate of those under age 50, while borrowers over age 60 grew at more than ten times the rate of those under 50.

Older people may be paying off their own student loans, or paying off loans they took to help one or more children get a degree. Much of the latter debt originates with Parent Plus loans. These are a type of federal loan that is available to parents (not grandparents). They constitute about 10% of the $95.9 billion in student debt that was distributed in 2020-2021.


Student Debt Can Make Retirement Difficult


As estate planning attorneys, we meet with parents every day who are concerned with their heirs’ financial security. It is natural for parents to want to help their adult children. That said, saddling oneself with debt for children’s college educations can wreck the possibility of enjoying even a minimally comfortable retirement. Another problem more pressing for older borrowers than their younger counterparts is medical expenses. According to the Consumer Financial Protection Board, 39% of consumers 60 and older who have student loan debt face difficulty paying for prescriptions, dental care and doctor visits, as opposed to 25% of their peers without such debt. Default rates are higher for older borrowers, too: 69% higher for borrowers aged 50 to 64 and 116% higher for those 65 and older, compared to borrowers younger than 50 ( National Center on Law & Elder Rights).

If you are an older person carrying federal student debt, the good news is that your Social Security benefits are not in jeopardy – at least, not now. The federal government stopped those collections. But there is no guarantee that they won’t be re-instituted.


How Proposed Student Loan Forgiveness Could Impact Older Borrowers


The Biden Administration’s Loan Forgiveness program may be able to provide you with some relief, but it is now being challenged in the courts. The program is controversial, to put it mildly. Proponents say it will stimulate the economy. Democratic Senator Elizabeth Warren applauds it, noting it will help millions of struggling parents who just wanted to help their kids get college degrees and now are “unable to pay off their homes or retire.” Republican Senator Mitch McConnell has a different view: he has called it “socialism” and believes it is unfair both to taxpayers and to those who pay their debts.

If the student loan forgiveness program does go forward, a parent with an annual income of up to $125,000, or two parents with double that income, would be eligible for up to $10,000 in federal loan forgiveness. The parent borrower – not the student – must apply for loan forgiveness through the student aid website portal. Even though the program remains up in the air at present,  you can still get your ducks in a row and apply for loan forgiveness. The deadline is Dec. 31, 2022.  Submit your application through the portal.

Also, if you are a parent or grandparent who has guaranteed any portion of someone’s student loan, any loan forgiveness the student secures will obviously apply to whatever portion you have guaranteed.