Student loans, in general, cannot be discharged through declaring personal bankruptcy. Today, there are $86 billion in student loans owed by people aged 60 and older, with an average amount of $33,811 (according to Mark Kantrowitz of SavingForCollege.com). Every couple months, there is a news feature article about someone living solely on Social Security Retirement and it is being garnished for student loans. The story will then detail the financial struggles that they face. Today, the rule for Social Security garnishment is that it cannot exceed 15% of your monthly payment and the garnishment must leave at least $750 per month for the retiree.
To end up in retirement with student loan balances, several very poor financial decisions have occurred. A few of these may include:
- Not mapping out tuition and other costs of attendance compared to the savings you or your family have dedicated for this degree.
- Selecting a college where starting salaries cannot support the level of debt you will have taken out to complete the degree.
- Needlessly lengthening the number of years in school by switching majors; often or near graduation (or worse, after graduation so you have to return for additional course work). Hint: get involved in your industry and talk to people to learn as early as possible which field of study is the best path for you.
- Selecting a field of study with little or no market demand or a shrinking industry.
- Choosing to defer paying your loans, allowing the balances to grow exponentially.
- Co-signing on loans for other people or your children who have a poor track record of managing money or following through with commitments.
- Did little or nothing to secure grants, scholarships, or part-time jobs to reduce student loan amounts.
- Did not fund any retirement accounts for an additional source of retirement income
Yes, of course there are people that have fallen ill and are unable to work. But outside of a rare set of unusual circumstances; many poor decisions have to be made in order to wind up in the middle of a student debt horror story. Every retiree story that I have read or heard about with student loans had made several reckless financial choices that created their financial situation. All decisions with a large financial consequence need to be thought through, planned, and managed until the very end – and student loans are no different.