Student-loan debt is not just a problem for young, recent college graduates searching for their first jobs. Growing numbers of adults nearing the ends of their careers are accumulating such big debt, too, and they don’t have a lifetime to pay it back.
In fact, student-loan debt is growing fastest among adults ages 60 and older, with more than two million people in that age group now owing an average of $19,000, according to the Federal Reserve Bank of New York. Their default rates are rising, too, and increasing numbers of retirees are seeing their Social Security checks garnished because they fell behind on student-loan payments.
Many of these older borrowers thought they could increase their marketability by earning an advanced degree later in life but are struggling to make ends meet instead. The number of people over age 50 enrolling in graduate schools more than doubled over the two decades between 1987 and 2007, when more than 182,000 enrolled, according to data from a survey published every 10 years by the U.S. Department of Education. The total amount of outstanding student-loan debt among this age group reached $155-billion in 2012.
Many factors lead to increasing debt loads for older borrowers. The recent recession drove more people back to graduate school. Tuition is rising. And the number of full fellowships being offered to graduate students is declining. Older borrowers also tend to spend more time in their programs than younger students because many also hold full-time jobs. Some are single parents juggling child care, work, and school.
Desperate for Help
“I fully expect to die with this debt,” says Matthew, a former meteorologist who lives in the Boston area and asked that his last name not be used. He enrolled in graduate school when he was 58, earned a master’s degree in mental-health counseling, and now, at age 65, is unemployed and owes about $70,000 in student loans. “It’s not great to work your whole life and end up this way.”
Among borrowers ages 50 to 70 struggling with graduate-school debt are those who say they lost jobs in government, law, information technology, and the automobile industry during the recession. Others, wanting to earn more money, tried to reinvent themselves for the new economy in fields like health-care administration and nursing. Some wanted to earn more credentials to advance in their fields.
As they struggle to repay their student-loan debts, some older borrowers have been through bankruptcy and home foreclosures. Some had move in with their children.
Robert M. Applebaum, a former assistant district attorney from Brooklyn, started StudentDebtCrisis, an advocacy group, and created a Facebook page to serve as a virtual support system for borrowers to talk about how student debt affects their lives. “Many seniors are at their wits’ end, contemplating suicide,” says Mr. Applebaum, whose Facebook page has nearly 10,000 followers. “They’re so desperate for any kind of help.”
Federal programs do offer some help. When Matthew, the meteorologist, was employed, he qualified for the government’s income-based repayment program, which allowed him to make monthly payments based on his income rather than on how much he owed. The program reduced his monthly bill from $500 to $250.
Now unemployed, Matthew says his loan is in forbearance, but the interest will continue to accrue on his account. With no retirement savings, Matthew is also using other aid programs to help him get by: he lives in subsidized housing, depends on Meals on Wheels, and has applied for food stamps.
Kathleen M. Bullock, 54, who lives in the Bronx, has found the limits to how much the government can help. She and others say that recent federal legislation designed to give student-loan borrowers some relief doesn’t do enough to assist older people. The pay-as-you-earn option, started in December by the Obama administration, caps monthly payments at 10 percent of discretionary income, and offers loan forgiveness after 20 years, or after 10 years of work in public-service jobs. Borrowers who took out loans before October 1, 2007, are not eligible. And older borrowers may not have a decade or two left in which to pay off their loans and take advantage of those grace periods.
Older people who are considering enrolling in graduate school should try to avoid taking on debt because they will have less time to repay it, says Mark Kantrowitz, a financial-aid expert who is the publisher of Fastweb. “They should not borrow more than they can afford to repay in 10 years or by the time they retire, whichever comes first.”
Ms. Bullock, who earned her bachelor’s degree when she was 39, received a master of fine arts at City College of the City University of New York, in 2011. She has decided to go back to graduate school again because that first master’s degree did not lead to as lucrative a job as she had wanted. She is now enrolled in a two-year master’s program in human-resource management at Mercy College, which is costing her a total of $35,000. She already took out $35,000 in loans for her undergraduate degree, $30,000 for her first master’s degree, and expects to finish her second master’s degree owing a total of $95,000 for her education.
“I thought that by going back to graduate school I would be able to get a higher-paying position and make six figures so that I can pay back my loans,” says Ms. Bullock, who is dragging out her course work over a longer period so her loans will stay in deferment, even though she is racking up more debt to avoid paying her original debt. Meanwhile, she is working at a public-relations firm in Westchester County and hoping to land a higher-paying position some day.
“My way of dealing with this is to keep going to school and deferring and deferring,” she says. “I don’t think this is healthy. At some point I will have to pay the piper.”
Wasting Time and Money
Delinquency rates among older borrowers have grown, from about 6 percent in 2004 to more than 12 percent last year, according to the Federal Reserve.
Joan Roberts is one of those people who took a gamble on graduate school and lost.
It has been six years since Ms. Roberts, a 63-year-old divorced mother of two and former art teacher, defaulted on more than $190,000 in federal and private loans she took out for graduate school. The unpaid principal plus accrued interest and collection costs now total just over $267,000.
“I went to grad school in order to support my family and myself better,” she says. “I was married, to quite a wealthy man at the time, and was also building my reputation as an artist. I panicked when my marriage broke up and I had an infant and small daughter. I started pursuing degrees.”
In 1998, at age 48 with two master’s degrees, Ms. Roberts enrolled in a Ph.D. program in art education at Columbia University’s Teachers College with hopes of becoming a professor. Though her transcripts say she was an A student, in e-mails and progress reports from 2006, her faculty mentors say her work didn’t measure up and they could no longer help her.
Ms. Roberts says she wishes her faculty advisers had told her years earlier that she wasn’t going to cut it in the program instead of allowing her to continue on, and continue to rack up debt, for eight years.
“I couldn’t afford to waste that kind of time or money,” she says.
Ms. Roberts was told in October of 2006 that she would not be allowed to continue in her doctoral program after she refused to revise two pre-dissertation papers within three months, a time frame she considered unreasonable. She wrote letters of appeal to the graduate dean, provost, and university president. They all stood by her department’s decision.
She filed for bankruptcy, hoping her debt would vanish. That didn’t work; under federal law, it is almost impossible to discharge student loans through bankruptcy.
Ms. Roberts still has no Ph.D.—and no job. She lives in subsidized housing in New York City and gets by on $175 per month in food stamps. She sometimes earns a little money by selling her paintings and teaching private art lessons to schoolchildren. Adding to her troubles, the Department of Education has threatened to have her monthly Social Security checks garnished.
“I may never get relief,” she says, “and I cannot plan for my future.”
As default rates rise among older borrowers, a growing number are losing part of their Social Security benefits to pay off their loan debt. Data from the Treasury Department’s Financial Management Service show a sharp increase in the number of retirees who had at least one Social Security payment reduced because they fell behind on student loans. There were only six such cases in 2000; last year there were 119,000.
Garnishments have steadily increased since 2005, when the U.S. Supreme Court ruled that the government could take up to 15 percent of senior citizens’ Social Security payments to collect on student loans.
A Rude Awakening
Harold Grodberg, a lawyer for the elderly in Clark, N.J., says student-loan debt has devastated many of his clients, including those who have had their Social Security payments withheld.
“The generation I’m dealing with, they worked very hard, they saved their money, they’ve seen their savings erode,” he says. “My clients who receive Social Security benefits live month to month.” And when those checks are reduced, he adds, people have to make choices to deprive themselves of basic needs, like medicine and food.
“This garnishment of Social Security is going to cause a tidal wave of problems,” Mr. Grodberg says. As older people with overdue loans continue to age, their health-care needs will very likely grow and they may not be able to pay for the help they need, including at assisted-living facilities that Social Security benefits are often used to cover.
For a generation reared to believe that higher education is the door to opportunity, and that graduate degrees equal increased employability, a growing number of baby boomers are experiencing a rude awakening.
In hindsight, some of these borrowers say they would have still pursued that extra degree. Others say they wish they would have paid closer attention to the documents they signed or considered different financing options. A few concede that they were overly optimistic about how much a higher degree would pay off.
Holly L. Sherlock, 54, earned a doctorate in health-care administration from Capella University in 2010, thinking it would help her find a better job. But she says that potential employers have told her that her Ph.D. makes her overqualified. That degree cost her $90,000.
Ms. Sherlock works as a nurse and has refinanced her house to help her manage her credit-card payments and her $600 monthly student-loan payments. She says she is thankful to have a job but has yet to reap the higher pay that she had hoped her advanced degree would bring.
“In this economic climate,” she says, “I don’t think going to graduate school is worth it.”
