We Make Deals with the Devil

Fundamentals of Market Investing by Adam J. McKee

It is extremely difficult to save for the future when you are still striving to pay off past costs.  Over half (55%) of workers report having a problematic level of debt.  In addition, a quarter of employees indicate their current level of debt is higher than it was five years ago.  According to Market Watch, “The total outstanding student loan debt in the U.S. is $1.2 trillion, that’s the second-highest level of consumer debt behind only mortgages.  Most of that is loans held by the federal government.  About 40 million Americans hold student loans and about 70% of bachelor’s degree recipients graduate with debt.”

This is not just a problem for lost millennials living in Mom’s basement.  According to a 2017 report from the Consumer Financial Protection Bureau (CFPB), the number of people 60 and older with student loans quadrupled from about 700,000 to 2.8 million individuals between 2005 and 2015.  The average debt owed by older borrowers also nearly doubled during that time, going from $12,000 to $23,500.  Many older people borrowed for college or cosigned student loans on behalf of their kids and grandchildren.  However, some Americans 50 and older took on debt to finance their own education or help a spouse earn a degree.

Many of them now are having trouble meeting their financial obligations.  Since 2015, nearly 40 percent of federal student loan borrowers 65 or older are in default, the CFPB says.  A growing number of older borrowers have had a portion of their Social Security retirement or disability benefits seized for nonpayment of federal student loans.  (Drain the swamp, indeed).  The Government Accountability Office (GAO) recently reported that 114,000 older borrowers suffered such garnishments in 2015.  The typical garnishment was just over $140 a month.  In addition, nearly half of defaulted borrowers were subject to the maximum garnishment, or 15% of their Social Security benefit.


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