economy, income, retirement

How Can Student Loan Debt Threaten Your Retirement?

I recently talked to a client who is 50 years old and has $75,000 in student loan debt that they do not seem to be making any headway to eliminate. It illustrates a huge issue many people are facing as they approach retirement.

 

In 2018 student loan debt totaled $1.5 trillion… Student loans are unique in terms of unsecured debt in that the government can take extreme measures to recover defaulted student loans, including seizure of tax refunds and garnishment of wages. (1)(4)

 

In addition, the government can also garnish up to 15% of a person’s social security check to pay back defaulted student loans. For most American’s Social Security makes up the bulk of their retirement income. Loss of part of the income can have a catastrophic effect on a house hold.

According to a GAO report from 2016, (3)

“About 114,000 student loan borrowers over 50-years-old are losing out on a portion of their Social Security benefits because of an old student loan and the number of borrowers over age 65 facing this predicament has increased 540% over the last decade.” (2)

 

“More than 70% of the $1.1 billion collected through Social Security benefits to pay off student loans only applied to fees and interest — meaning that those funds likely barely made a dent toward paying back the borrower’s debt. More than 50% of borrowers at least 50-years-old who are losing out on Social Security benefits had no portion of that offset applied to their principal.” (2)

 

The population taking out education debt is changing;

“The number of borrowers over 64-years-old increased 385% since 2005, compared with an increase of 62% for borrowers between ages 25 and 49. About three-quarters of older borrowers had taken on loans for their own education — not their children’s.” (2)

 

As good paying jobs with benefits become more difficult to hold on to and find, workers are forced to return to school to improve their skillsets and background. Technology and the cost cutting from corporations are forcing workers to become better educated in an increasingly competitive job market.

 

Student Loan debt is not just an issue for young people of college age, it is an issue that affects all ages and all demographics. Economic instability is looming larger and we need to develop strategies that make people successful in both the short term and over the long term.

 

To discuss this issue and others related to building a sustainable financial future reach out to me at james.cox@ffgadvisors.com

Retirement Income. Tax Efficient Planning.

Life Insurance. Disability Insurance

Socially Responsible Investing

 

To learn more contact:

James Cox

Cell: 267 323 6936

Email: james.cox@ffgadvisors.com

First Financial Group Advisors 744 W Lancaster Av Suite 235 Wayne, PA 19087

 

This material contains the current opinions of the author but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice.

 

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Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 7 Hanover Square, New York, NY 100034. 888-600-4667. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is an indirect, wholly-owned subsidiary of Guardian. Devon Financial Partners, LLC is not an affiliate or subsidiary of PAS or Guardian. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation

 

2018-61412 exp 6/20