May 2017 RPS Home Page   |   Newsletter Home     

Student Loans Meet Retirement

The burden of student loans is typically associated with recent college graduates or young professionals, but the number of consumers age 60 and older with student loan debt quadrupled from 2005 to 2015 (see chart). During this period, the average amount owed by those 60 and older rose from $12,100 to $23,500.1

Repaying college debt can make it more difficult to save for retirement. Student loan borrowers who are 50 to 59 have lower retirement account balances than those without such loans. In 2015, 29% of loans by borrowers age 50 to 64 were in default, compared with just 17% for those under 50. For borrowers who are 65 or older (many of whom may be retired and living on a fixed income), the default rate was even higher at 37%.2

If you have student loan debt or are considering a higher-education loan, here are some factors to keep in mind.


Federal Offsets
The federal government can withhold all or part of a tax refund and up to 15% of monthly Social Security benefits to pay back defaulted federal student loans.3 (These federal “offsets” do not apply to private student loans, but private debt collectors may threaten to take such action.) Unlike some forms of debt, student loans cannot be discharged through standard bankruptcy proceedings.



Payment Considerations
Federal student loans offer a variety of income-based repayment plans, but it’s important to make sure you are enrolled in the appropriate plan if your income changes, such as when you shift into retirement. Borrowers of Parent PLUS loans, designed specifically for parents, are eligible for a limited income-based repayment plan, but the loan must be converted to a federal consolidation loan.

When making payments for a student who has multiple loans that have not been consolidated — for example, if you co-signed a loan for a student who has other loans under his or her name — make sure that your payments are being applied to the appropriate loan in order to preserve your own credit.


Think About Your Own Future
Although some older Americans still carry debt from their own education or a spouse’s education, almost three out of four student loan borrowers age 60 and older carry loans for children or grandchildren.4 Many parents feel a deep sense of responsibility to help put their children through college. But it’s also important to focus on your own financial future and maintain a consistent and realistic retirement strategy. You won’t find any scholarships to help pay for retirement.

1–2, 4) Consumer Financial Protection Bureau, 2017
3) U.S. Government Accountability Office, 2016

Home   |   Employment
Recovery
  |   Will You Outlive
Your Money?
  |   Moving to Medicare? Four
Facts to Consider

This information is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Broadridge Advisor Solutions. © 2017 Broadridge Investor Communication Solutions, Inc.

THE RETIREMENT PLANNING SPECIALISTS, LLC is a Registered Investment Advisory firm specializing in retirement planning and investment management for individuals committed to a secure financial future. Our objective is to help our clients make educated and informed decisions in order to reduce taxes, increase income, and secure their financial future. If we can be of assistance to you or someone you know, please contact us at the address and phone number below:
The Retirement Planning Specialists, LLC
5460 S. Quebec Street, Suite 333 • Greenwood Village, Colorado 80111 • (303) 771-3088 • (888) 771-5406
www.RPSpecialists.com