The break on federal student loan repayments ends in January. And, on February 1, interest will start to run again. These monthly repayments can come as a shock to many Americans, including older borrowers.
While more than a third of student borrowers are between 20 and 30 years old, around 7% of people in debt are between 45 and 59 years old and 1% are 60 years or older.
Cassandra Shorter, 60, is a program manager in Houston. When she enrolled in college in 1979, she initially had about $ 17,000 in student loans and that debt has now more than doubled.
“After I graduated from high school I went to college, then I had my daughter, and about 30 years later I graduated in Bible counseling,” she said. declared. Shorter worked and attended school for three decades before graduating in 2009.
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Over the next decade, she often asked for forbearance from temporarily ceasing to repay her loans. âEvery year I would have abstention as an option, so I would,â she said. “But now I have almost $ 36,000 in student loans.”
Unlike Covid-19 emergency aid which suspended federal student loan payments and essentially set interest rates at 0% since March 2020, forbearance before the pandemic was very different. As a general rule, if you are granted a forbearance on federal student loan payments, you are still responsible for paying any interest accrued during that forbearance period.
Now Shorter worries that she won’t be able to pay all she owes.
Older borrowers who still repay their student loans often have higher balances than younger generations and less time to repay those loans. Fidelity Investments data shows that while the average student debt for Gen Z borrowers is $ 27,900 and $ 46,400 for Gen Y, Gen X borrowers owe $ 51,400 and Baby Boomers owe $ 58,300.
âAs you get older, you take out higher interest loans,â said Amanda Hahnel, student debt repayment manager at Fidelity. âAs you get older, you take out loans for yourself and your children.
âSo you get hit both ways. “
Additionally, Fidelity has found that many older student loan borrowers with access to workplace retirement savings plans face a double debt crisis as they often take 401 (k) loans as well. .
“We see almost double the number of people with 401 (k) loans when they have student debt compared to those who don’t, and that’s really a mark of financial hardship,” Hahnel said. .
About 30% of baby boomers and 32% of indebted Gen X borrowers also have a 401 (k) loan, according to Fidelity data, compared to 17% and 23% of all 401 (k) savers in age groups who have borrowed from their 401 (k) plan.
Shorter said she had thought about tapping into her nest egg, but believes she is now too close to retirement to do so. While she hopes the government will expand its loan cancellation programs to include longtime borrowers like her, she knows it’s unlikely. So she is planning for next year.
To prepare for the end of the repayment hiatus on Jan.31, 2022, college funding experts say you should revisit your budget to see how this new expense fits.
Make sure your loan service provider has up-to-date personal and financial information in case you have moved, changed jobs, are no longer employed, or have had other changes in your life. And, also make sure your loan manager has your correct banking information, especially if you plan to resume automatic payments.
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