Friday, August 23, 2019

Warning: It can be dangerous to go to college if you are middle-aged

If you are 40 years old and don't have a college degree, you probably want one.  On average, people with college degrees make more money over the course of their lives than people without degrees.

Nevertheless, if you are in your  forties, fifties, or sixties, you must be careful about taking on debt, because you have fewer working years than a younger person to pay it back. And people in midlife or older need to be putting money away for their retirement.

That's why a report issued by the Department of Education earlier this month should be concerning to older Americans. The report is short--just two pages long, but it contains some interesting findings.

Twenty-five years ago, 60 percent of college completers in their twenties (age 24-29), took out student loans to pay for their education. Older graduates borrowed less. Only  about a third of graduates in their forties left college with student debt. Among people aged 50 or older, only 19 percent graduated with student debt.

But student-borrowing patterns have changed. In 2015-2016, 66 percent of college graduates in their twenties had taken out student loans. And among people in their forties, 71 percent had student debt when they graduated. In other words, for people who graduated college in their forties, the percentage who carried debt has doubled over 25 years (from 35 percent to 71 percent).

Moreover, the amount of student-loan debt taken out by students in their forties quadrupled between 1995-1996 and 2015-2016. Twenty-five years ago, people in their forties graduated with an average student-loan debt of $4,400. In 2016, this same age group graduated with $18,800 in student-loan debt (in constant dollars).

The DOE report's findings don't suggest that middle-aged people should not seek a college degree. It is probably a good idea for nearly everyone. But the report contains an implicit warning to older college students: Don't take out more student loans than absolutely necessary because you may have a very difficult time paying it back.

Already, millions of student debtors are enrolled in 25-year income-based repayment plans. A 25-year-old in such a plan will be 50 years old before he or she makes the last loan payment. But a person who graduates at age 50 and is forced into a 25-year repayment plan will be 75 years old. before the plan ends.

Who wants to be making student-loan payments during their retirement years? And remember, elderly people who default on their student loans can see their Social Security checks garnished. Bummer!

Did I make my monthly student-loan payment this month?


References

U.S. Department of Education (2019, August). Changes in Undergraduate Program Completers' Borrowing Rates and Loan Amounts by Age: 1995-1996 Through 2015-2016.

2 comments:

  1. People over 50 should stick to Junior Colleges and Vocational Schools. These can cost as low as a few thousand per semester, and the student can live at home of course. This should keep down the amounts borrowed.

    I just wince when I read about a middle aged person starting a nursing degree. And when I read about an older person borrowing for a social work or counseling degree, I do more than wince. I want to demand that the Department of Education simply ban that kind of loan.

    We need to be far more paternalistic, and deny federal support for insane and unpayable loans.

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  2. Thank you Richard for what you are doing. I am very grateful that you help me through the student loans debt. Being a legal expert on this topic is great and far cry out from others have commented on this very issue. See https://www.armstrongeconomics.com/international-news/politics/advice-for-trump-how-to-win-2020/. Regardless of political sides, it is still an upheaval struggle. To revival and revitalize Americans who cannot find jobs and making ends meet, debt jubilee is necessary. See https://michael-hudson.com/2019/08/ellen-brown-on-peak-debt-jubilee/. I wish you well and further success helping student debtors who had the same struggle as I did. Thank you very much and I appreciate you.

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