Older Student Loan Borrowers Face Precarious Long-Term Financial Security

January 17, 2017, Written By Bill Hardekopf

Older student loan borrowers are concerned about servicing practices that can potentially jeopardize their long-term financial security, according to a recent report from the Consumer Financial Protection Bureau.

From 2005 to 2015, the number of older student loan borrowers has quadrupled, increasing from 700,000 to 2.8 million, and the amount of debt per older borrower has nearly doubled from $12,000 to $23,500. Nearly 75% of older borrowers are also helping their children and grandchildren pay for their college education.

Older borrowers are struggling to make payments, as they face obstacles to enrolling in income-drive repayment plans and accessing their co-signer protections. In 2015, nearly 40% of student loan borrowers over the age of 65 were in default.

“It is alarming that older Americans are the fastest growing segment of student loan borrowers,” said CFPB Director Richard Cordray. “Many of these older Americans are helping to finance their children’s or grandchildren’s education while living on a fixed income. We are concerned that student loans are contributing to financial insecurity for many older Americans and that student loan servicing problems can add to their distress.”

Many of these older borrowers are living on a fixed income and have little in savings. They may be trying to repay student loans while also juggling later-life expenses and other debts, such as mortgages, credit cards and auto loans. Not only does this group typically see a decrease in income, they may also face physical and cognitive impairments common with aging, which can limit their ability to work. Sadly, older borrowers are more likely to skip necessary health care expenses, including prescriptions or doctors’ visit, because they cannot afford them.

The CFPB is examining common problems that older borrowers are reporting, including:

  • Delaying or prohibiting enrollment in income-driven repayment plans. Some borrowers are reporting that servicers are not telling them that their loan payment amount could be reassessed under an income-driven plan when their income decreases. Instead, many of these borrowers claim they are being placed in plans that are designed for people with growing incomes. For those in default, many say their Social Security benefits are being offset to repay the loans, even though they have a right under federal law to cure their default and join an income-driven repayment plan.
  • Incorrectly applying co-signer payments to other loans. Private student loan servicers usually apply payments across all loans owned by the primary borrower. Some co-signers say their payments seem short because they were spread out over all of the loans, which can result in late fees and interest charges, as well as late and missing payments being reported to credit agencies.
  • Failing to provide borrowers access to loan information. Some borrowers say servicers are not responding to their requests for additional information. Others say that by the time they receive a notice of missed payments, they have accrued penalties and fees. Still others say they did not receive notice before a negative report was sent to the credit reporting agencies.


The information contained within this article was accurate as of January 17, 2017. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.