July 16, 2019

Senior Citizens and Student Loans

Student loans are often in the news, but a Washington Post article in April of this year examined the increasing problem of senior citizens with student loan debt.

New research from the Federal Reserve Bank of New York shows that Americans 60 and older still owe about $36 billion in student loans, providing a rare window into the dynamics of student debt. More than 10 percent of those loans are delinquent. As a result, consumer advocates say, it is not uncommon for Social Security checks to be garnished or for debt collectors to harass borrowers in their 80s over student loans that are decades old.

…Some of these older Americans are still grappling with their first wave of student loans, while others took on new debt when they returned to school later in life in hopes of becoming more competitive in the labor force. Many have co-signed for loans with their children or grandchildren to help them afford ballooning tuition.

Thanks to a near-constant stream of news stories, most people know that student loan debts are generally not dischargeable in bankruptcy, but seniors struggling with student loan debt and other unsecured debt (medical bills, credit card debts, etc.) need to be particularly smart about their debt load and how they service it.

An all-too-common story of seniors’ debts

When medical bills and living expenses are paid with credit cards, there may come a time when senior citizens on a fixed income can no longer service the debt.  Sometimes, seniors choose not to rely on credit cards, instead using cash usually reserved for the mortgage and other real estate expenses to pay for daily expenses, which results in them falling behind on their mortgage payments. At some point the credit card company may attempt to collect the balance owed (including interest, fees and legal expenses) through a lawsuit. Likewise, the mortgage company may initiate foreclosure proceedings.

If discharging significant unsecured debt in a bankruptcy case would speed up repayment of student loans, a  bankruptcy case ought to be considered.