Senior citizens are trapped in children’s student loan debt
Senior citizens are trapped in children’s student loan debt
Most seniors are struggling in their retirement years to make ends meet as their retirement income and nest eggs are stretched to the limit in today’s economy. However, many seniors who took out federal loans or co-signed college bank loans to help children and grandchildren with their education now find themselves in a situation that they never anticipated: calls from debt collectors, garnishment of Social Security wages, and loss of a formerly stellar credit rating.
The Columbus Dispatch, in an article on Dec. 17 by Mike Wagner and Jill Riepenhoff (www.dispatch.com/content/ stories/local/2012/12/17, “More Seniors Trapped in Children’s student debt”), investigated the plight of seniors who took out loans to help children but never fully understood the long-term impact. As one man stated that the older generation “paid our dues…worked all our life and tried to do right by our kids ... but these loans can come back and haunt you in ways that you never think about.”
Wagner and Riepenhoff report that although there are no statistics on how many parents and grandparents have assumed their children’s and even grandchildren’s student loan debt; however, the number of borrowers more than 60 years old has tripled since 2005, according to statistics from the Federal Reserve Bank of New York. Additionally, the number of those who have fallen behind in payments has also tripled from 63,000 to 198,000.
For the most part, these are parents and grandparents who signed federal parent PLUS loans or co-signed on a private student loan from a bank, assuming that the college graduate they intended to help would make the payments. The demand for help by would-be students continues, since last year about 90 percent of borrowers who took out a private student loan had a co-signer, up from 55 percent in 2005.
The issue is that borrowing for a college education for someone else carries significant risks, risks that are not obvious at the outset. These loans are largely exempt from discharge in bankruptcy court. Federal parent loans lock borrowers into a 7.9 percent interest rate; parents cannot consolidate loans into one payment, and are ineligible for the government’s incomebased repayment plan, even if the borrower is now on a lower, fixed income.
Seniors who are looking to retire and living on a fixed income carry an average loan balance of nearly $20,000, about $6,000 less than the average debt load of a new graduate with a bachelor’s degree. What if the new graduate cannot find work? Parents are often struggling to make payments that directly affect their own credit ratings and ability to find housing and refinance mortgages. As one man who was interviewed stated,
STEAMBOAT SPRINGS, Colo. — After nearly 50 years of living in the Rocky Mountains, I thought I knew how to enjoy the winter. I’ve gone skiing, skating, snowshoeing, snowmobiling, tobogganing, sleigh riding, dogsledding and more.
But until this winter, I’d never heard of bumper cars on a skating rink. And it wasn’t until recently that I had my first chance to carve turns down a ski hill on a snowbike.
It’s part of a trend to provide visitors to ski resorts and other snowy destinations with a wider variety of choices, said Troy Hawks, managing editor of the National Ski Areas Association Journal.
“What we’re seeing is a larger swath of the family — you’ve got the grandkids all the way to the grandparents — and all of them have their idea of how they want to spend their day,” he said.
Some activities are more popular in certain regions, and some aren’t well advertised, so for a different spin on a snowdestination vacation, here are some things to look for:
Air bags
These massive, inflatable air bags are placed at the bottom of jumps to allow skiers and boarders to try flips and spins. Nail the landing on your feet and you ride off down the hill. Fail, and you have a soft landing; www.bagjump.com or www.bigairbag.com.
Airboards
A high-tech spin on winter tubing, these snow body boards are inflatable sleds with molded plastic runners on the bottom and handles on the top. The sleds can reach speeds of 60 mph or more (nearly 100 kilometers per hour), and users steer by shifting their body weight. They’re offered at some ski areas (though banned at others) as well as through some private operators; http://www. airboard.com has a partial list of rental locations.
Bumper cars on ice
Just what it sounds like, these are turning up at skating rinks from coast to coast. The battery-operated “cars” are large rubber tubes with molded seats that can hold one adult or an adult and small child. Controlled by two joysticks, they are easy to steer or spin as they bump along on wheels with tiny cleats. Most rinks have age, height or weight restrictions.
First tracks
The opportunity for intermediate and advanced skiers to take the first runs in the morning before the slopes open to the public is an option at more resorts. Some, like Northstar in California, require skiers to stay with a guide; others, like Aspen, Colo., include a gourmet breakfast. Steamboat Springs, Colo., has been experimenting with multiple day First Track passes, some of which can be shared among buddies.
Skijoring
From the Norwegian word meaning “ski driving,” skijoring is still primarily the stuff of winter carnivals and cowboy com- petitions. But some places, like the adult-only Triple Creek Ranch in Darby, Mont., offer guests the chance to see what it’s like to be pulled on Alpine skis behind a horse. Other resorts, like Eden Mountain Lodge in Eden Mills, Vt., and Devil’s Thumb Ranch in Tabernash, Colo., work with experienced skiers and their own dogs to learn what it’s like to go mushing on Nordic skis.
Ice castles
These massive ice castles are formed by thousands and thousands of ici- cles. A series of pathways take visitors through ice columns, tunnels, caverns and archways. Introduced last year in Silverthorne, Colo., the castles were being built this winter in Steamboat Springs, Colo., and at the Mall of America in Bloomington, Minn.
Snowbikes
Bicycles that ride on skis, rather than wheels, have been around in various forms for decades, but now they have the blessing of some ski resorts, which rent the bikes and offer instruction. Smaller skis clip to your ski boots, helping with balance and maneuvering. The bikes can be taken on the chairlifts to access a variety of terrain; www.snowbike.info .
Snowkiting
Snowkiting or kite boarding is a cousin to ocean kite surfing. For the winter version, an experienced, fearless skier or snowboarder is harnessed to a kite and uses wind power to propel themselves around. An extreme sport, it requires strength and an understanding of wind patterns. Lessons are recommended. “My credit being ruined hurt the most. I took great pride in that, and now, in my retirement, all my hard work is tarnished.”
Mark Kantrowitz, an expert on financial aid and publisher of the websites FinAid.org and Fastweb.com, says that the federal government should eliminate parent loans, and base all loans on the student’s ability to re-pay while allowing the poorest of the students to attend college for free. At the very least, some government leaders are recommending changes in the interest rate and consolidation rules.
This might not be a high priority for our government leaders right now, but it is becoming an increasing burden on seniors who did not realize what they were signing on for.
The legal advice in this column is general in nature. Consult your attorney for advice on your individual situation. Attorney Kathleen Martin is licensed to practice in the Commonwealth of Pennsylvania and is certified as an elder law attorney by the National Elder Law Foundation as authorized by the Pennsylvania Supreme Court. She is associated with the law firm of O’Donnell, Weiss & Mattei, P.C., 41 High St., Pottstown, and 347 Bridge St., Phoenixville.