The Forgotten Face of Student Lending

By Jodie Herrmann Lawson and Kurt Lentz

Mention student loans and the face that comes immediately to mind is probably someone in their early twenties. A recent report from the CFPB sheds light on an overlooked segment of the student loan population – consumers 60 years old and older. The number of older student loan borrowers has skyrocketed in recent years. The ranks of older student loan borrowers has quadrupled in the last decade and their amount of debt has grown exponentially. The CFPB’s report considers the effect student loans have on older borrowers and examines complaints filed by older borrowers.

So who are these borrowers? Baby boomers seeking a degree for a second or even third career? No. The majority of older student loan borrowers (around 73%) are financing their children’s or grandchildren’s educations. There were an estimated 2.8 million such older borrowers in 2015, up from an estimated 700,000 just ten years earlier. During the same period, the average debt load of student loans borrowers has more than doubled, going from $12,100 to $23,500. One trait these older student loan borrowers share with younger borrowers is an alarming default rate. Close to 40% of older student loan borrowers are in default.

The profile of older student loan borrowers differs widely their younger counterparts. Older borrowers are reaching the end of their peak earning years, while younger borrowers fresh out of college have their entire career in front of them. Health concerns that might hamper an older borrower’s ability to earn an income or to make payments are also less likely to plague younger borrowers. Finally, older borrowers are likely to have more debt, such as mortgages, credit cards, and auto loans.

Student loans can negatively affect older borrowers in ways they don’t affect younger borrowers. The federal government can offset older borrowers’ social security benefits to offset missed student loan payments. Older borrowers are also more financially vulnerable than younger borrowers, as seen in the higher likelihood to forego necessary healthcare needs.

Despite the differences in older and younger borrowers and the unique difficulties facing older borrowers, the number of CFPB complaints filed by older borrowers on student loans is small. Older borrowers have filed less than 2,000 complaints relating to student loans. The proliferation of older borrowers with student loans may, however, portend more complaints in the future.

Older borrower’s complaints have focused on several issues. Older borrowers complain about “roadblocks” to their participation in income-driven repayment plans. One common complaint is that servicers are slow to adjust income-driven plans when older borrowers switch from a salary to a fixed-income. Some of these borrowers are placed in graduated repayment plans better suited for their younger counterparts whose careers are in the ascendency.

Another complaint by older borrowers, specifically those who co-signed on a loan, is that their loan is allocated to other student loans owed by the primary borrower. This can have the double whammy effect of causing the older borrower to incur late fees and interest and resulting in a negative mark on the borrower’s credit history.

Older borrowers have also complained about certain debt collection practices. Some of the debt collection practices encountered, such as the use of aggressive and hostile tactics, are not unique to older borrowers. But older borrowers have also complained that some debt collectors of private student loans have threatened to collect on their federal benefits, including social security, even though social security benefits cannot be collected on based on private student loans.

The CFPB’s report does not offer any recommendations for addressing the issues faced by older student loan borrowers, but urges policymakers to consider the report in shaping reform in the higher education finance market. If the number of older borrowers continues on its upward trajectory, this will be an issue to watch for those in the student loan servicing industry and ultimately servicing older borrowers’ debt might require a different protocol tailored to the unique challenges they face.

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