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The problem of growing student debt in the United States largely concerns young people who are struggling to repay their loans in addition to their other bills. But seniors on fixed incomes also face many of the same challenges.
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Baby boomers have the highest average student loan repayments, highest average loan balances and highest average interest rates of any generation, Bloomberg reported last year, citing data from September from Fidelity Investments. Those numbers likely changed little in 2022 thanks to a pause in federal student loan payments that began in 2020 at the onset of the COVID-19 pandemic.
Yet seniors are often left out of the conversation when lawmakers, including President Joe Biden, discuss student loan relief, according to Andrew Pentis, loan expert and certified student loan counselor at StudentLoanHero.
The Biden administration has “been really great at targeted student loan forgiveness programs” for veterans, people with disabilities and other groups, Pentis told MarketWatch recently. This is not the case for older borrowers, however, despite the fact that seniors make up a large share of student loan holders.
Of the $1.6 trillion in total student debt at the end of 2020, borrowers 50 and older owed about $336.1 billion, or about 22%, AARP reported. This represents a more than five-fold increase since 2004.
When it comes to individual loan amounts, baby boomers tend to carry more debt than other groups. Fidelity analysis found baby boomers had an average monthly loan payment of $620 as of Sept. 30, 2021. That compares to $490 for Gen X, $510 for Gen Y, and $480 for Gen Z.
On average, baby boomers had a loan balance of $58,000 compared to $51,000 for Gen X, $46,000 for Gen Y and $28,000 for Gen Z. Average interest rates were 6 % for Baby Boomers, 5% each for Gen X and Gen Y, and 4% for Gen Z.
It should be noted that Fidelity’s monthly average of $515 for all groups is higher than education data providers’ estimates, which have an average of $390 based on the total number of borrowers and the outstanding student debt in the United States.
And those payments will resume soon. While some lawmakers have tried to expand student loan relief and even forgive loans for millions of borrowers, so far Congress hasn’t received much support.
As it stands, Biden has extended the student loan pause until May 1, which means borrowers only have a few months left to figure out a strategy. For many seniors, that will be difficult — especially those who rely heavily on Social Security income to pay the bills.
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To prepare for the resumption of payments, Pentis recommends contacting your federal loan officer to make sure your account is in order. Also, if you’ve been on an Income Contingent Repayment (IDR) plan, make sure you’re still eligible for the plan and that it’s up to date.
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