|Three million Americans are in default on |
their student loans taken out 30 – 40 years ago !
How would you like to be 65 years old and still paying off student loans that you took out over 40 years ago? Believe it or not, more and more seniors are facing this problem every year.
Think you can just ignore the loans and no one will bother to chase you down? Think again. In 2013, the federal government took nearly $150 million out of the Social Security checks of America’s senior citizens in order to make payments on their unpaid student loans. The number of seniors facing these forced repayments has skyrocketed from 6,000 to 36,000 from 2002 to 2013 and the number continues to grow.
Making matters worse, more than 3 million Americans aged 50 to 64 are in default on their student loans. The number is so staggering it bears repeating: 3 million Americans are in default on their student loans taken out 30 – 40 years ago ! Stunning. And that number is expected to grow as well as more and more Baby Boomers retire and see a decrease in their ability to pay back what they owe. So what is going on here? How can it be that student loans taken out by 18 year olds 40 years ago can still be out there like a drogue anchor on America’s seniors?
The answer is twofold: (1) Most teenage borrowers didn’t have a clue about what they were signing on to when they borrowed the money all those years ago; and (2) most student borrowers thought that they would have good jobs some day and could easily pay off the loans long before they were planning to retire. Life, however, caught up with them after graduation, jobs didn’t pan out like they thought they would, they didn’t earn what they thought they would earn, the expenses of life were more than they had imagined and they knew very little about how to earn, manage and invest money because no one took the time to teach them. It was the perfect storm of financial bad news.
Make no mistake, the seniors that still owe all this money are not dumb. They are not bad people. They simply never had the benefit of learning about the financial life skills they would need when they were young to really get ahead in life. For today’s young people, however, that is going to change.
As a country, we are finally starting to recognize the benefits of teaching financial literacy skills before high school graduation. Ever Fi, a progressive education company, surveys 65,000 college freshmen each year to see what their attitudes are about money matters. It is probably the most comprehensive survey of America’s young people that there is. EverFi’s conclusion: those students who are exposed to financial literacy programs before high school graduation have much healthier attitudes about money in college and beyond. They are less likely to borrow money, more likely to save money and more focused on properly managing their money as they get older.
As we prepare to send yet another crop of high school graduates off to college in a few weeks we need to remember what we can learn from EverFi’s annual surveys. College students need to minimize student loans and borrow only what is absolutely necessary; they need to get a pair of scissors and cut up the unsolicited credit cards that will show up in their mailboxes with tempting credit limits that make it too easy to borrow money and buy things they can’t afford; they need to set up a budget that makes sense and stick to it no matter how much their friends may be spending; and they need to find a way to earn some money each semester to help defray the cost of the weekend parties and entertainment.
With a little thought and a commitment to really understand what it takes to be “money smart,” today’s college students can avoid the pitfalls of their parents and maybe keep all of what Social Security sends them some day.