Student loans for seniors — I’m not talking about high school seniors — I mean senior citizens.  Surprisingly, Americans 60 and older still owe billions in student loans.  A percentage of these loans are delinquent, which means senior citizens are facing garnishment of their Social Security checks and harassment from debt collectors contacting them about decades-old debt.

You would typically expect that by the time people reach their golden years, any student loans they took out to pay for college would be long paid off.  Unfortunately, that has not always been the case, in particular with the poor economy and high unemployment rates during the last decade.  And many borrowers were not aware of the difference between federal student loans and private student loans when they first borrowed money.  Private student loans are some of the riskiest ways to pay for college.  Typically, private student loans are too high for borrowers to repay or are in amounts far in excess of the student’s ability to repay out of their future anticipated income.  Unlike federal student loans, private student loans do not generally have the same consumer protections such as military deferments, forbearance in times of economic hardship, fixed affordable interest rates, or manageable repayment options.

It is important for people dealing with student loan debt to know that bankruptcy may not provide relief from these debts. When Congress passed the latest version of the Bankruptcy Code back in 2005, it banned student loans from bankruptcy discharge.  Currently, bankruptcy relief is now available only if student loan debtors can show “undue hardship,” which turns out to be a much higher standard that you would think.  All of the bankruptcy attorneys I deal with have not had any debtor in one of their cases be granted a hardship discharge.  But if someone is struggling with student loans they should still contact a good qualified bankruptcy attorney who can review all of their options.  If there is a way to get it under control, they can help.

In the meantime, Congress needs to wake up and start to take action on this issue.  What would really help is to make these loans subject to bankruptcy discharge.  If they are unwilling to do that Congress could take other actions like forgiving debt after 10 years of payments, capping interest rates, or granting incentives to lenders that expand forbearance programs for economic hardship.  Let’s hope they address this soon.

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