When federal student loan payments resume in February, baby boomers will bear the highest repayments among demographic groups by paying $ 620 per month on an average loan balance of $ 58,300. Baby boomers, many of whom are retired, are those Americans in their late fifties, sixties and 70s.
Younger student borrowers, meanwhile, Gen Z debtors in their early 20s, will pay the least at $ 480 per month on a balance of $ 27,900, according to data from Fidelity, the giant investment firm. based in Boston, which gleaned data from its online site. student debt tool.
The Fidelity survey is the latest evidence of the country’s magnitude of the country’s $ 1.7 trillion student debt, as older Americans who paid for career-enhancing education or helped parents pay for it. school struggle with student loans. Baby boomers pay even more than young adults who delay home buying and other life milestones to repay their loans.
Gen Xers, or those in their 40s to mid-50s, will pay $ 490 a month and millennials, those between 25 and 40, will pay $ 510, according to Fidelity.
The data comes from 60,000 users of a Online loyalty calculator to September 30. The borrowers, who typically carried multiple debts, repaid a total of 210,000 loans and worked in 6,000 businesses or organizations. There was no information on the duration of the loans.
The US Department of Education suspended monthly student loan payments during the COVID-19 pandemic, while private student lenders continued to collect payments. Most student loans are owed to the US government.
Two of the largest student loan managers, the Pennsylvania Higher Education Assistance Agency (FedLoan) and Navient, have chosen not to renew their federal contracts. Over 10 million borrowers are expected to be assigned new services, which some believe could lead to chaos and confusion.
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“We continue to see the impact of student debt across generations, and it’s a surprise to continue to see this amount [of loans] held across the population, ”said Amanda Hahnel, head of student debt repayment at Fidelity Investments.
Plus, baby boomers borrow from themselves – out of their retirement funds – to help pay off their student loans. “Older generations are also diving into retirement and taking 401 (k) loans to pay off student debt. It is a mark of financial difficulties, ”she added.
Hahnel said there were more younger borrowers than older borrowers. But baby boomers have higher loan balances and pay higher interest rates on loans, according to the survey. One of the main factors is that the terms of PLUS loans, which are taken out by parents, contain higher interest rates than other types of student loans.
Federal data also shows that the number of borrowers over 50 has increased in recent years while those under 25 have declined.
NerdWallet, a San Francisco financial website, said last month that one in four American parents who have borrowed from the federal government to help pay for a child’s college education do not expect to retire as planned. due to student debt.
And one in five parent borrowers regrets taking the loans, according to the NerdWallet survey.
Of the total $ 1.7 trillion in student debt, older Americans borrowed about $ 103 billion in PLUS loans in the second quarter of 2021. There are 3.6 million Parent PLUS borrowers, and the average loan totals over $ 28,000.
NerdWallet has warned that parents who borrow for children’s college education are stealing future retirement dollars.
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Fidelity manages around $ 11.1 trillion in assets and helps 38 million people invest their savings, according to the company. It has 52,000 employees.
According to Fidelity, the student borrowers with the highest loan balances and monthly payments are those working in the private health care and social assistance sector. They pay $ 713 per month with a loan balance of $ 72,004. Retail borrowers pay $ 507 per month and those in the manufacturing sector pay $ 510 per month.
Employers are also increasingly sponsoring student loan repayment matches, with about one in 10 employers offering this benefit, Fidelity found. The figure is expected to jump 300% in 2021, rising to one in three employers now that matches are tax-exempt, according to the Human Resources Management Company. Some of the companies for which Fidelity acts as administrator of student debt benefits include technology company Hewlett-Packard Enterprise and insurer Unum.