The Unexpected Burden of Student Loans on Boomers — Effective Strategies for Rapid Reduction
The average student loan for boomers, those born between 1946 and 1964, is a staggering $43,554. Despite being an older generation, boomers carry more student loan debt than any other generation. Let’s explore why boomers have the highest student loan debt and how they can reduce it quickly.
### Reasons Boomers Have the Most Student Loan Debt
Fred Amrein, a student loan repayment and college funding expert, explains that the financial aid process is a key reason why boomers lead in student loan debt. Traditional dependent students can only borrow $27,000 in their own name over four years. The remaining balance must be covered by savings or cash flow, which many families cannot afford. As a result, parents often take out loans for their children. Under current rules, parents have two major borrowing options: private loans or federal loans. Parents must cosign for private loans or take full responsibility under the Parent PLUS option.
### Problems with Parent PLUS Loans
Parent PLUS loans might seem like a good solution for funding college, but repayment can be challenging. These loans are easy to obtain if you have fair credit, as they can cover the full cost of attendance. However, repayment can be very expensive, a fact often not explained to parents or students. Defaulting on these loans can lead to wage garnishment, tax refund interception, and even Social Security garnishment.
### Misconceptions About Loan Transfer
Many parents believe that Parent PLUS loans can be transferred to their children, but this is not true. According to the Office of Federal Student Aid, Direct PLUS loans made to a parent cannot be transferred to the child, leaving parents responsible for repayment.
### Limited Repayment Options
There is a loophole in the repayment system that expires on July 1, 2025, but it takes four to six months to complete the process.
### How Boomers Can Reduce Student Loan Debt Quickly
Reducing student loan debt quickly is challenging for boomers, especially since they have limited time to save for retirement. Amrein advises that boomers need to fully understand their cash flow before and after retirement to determine available repayment options.
### Loan Forgiveness
Parent PLUS loans qualify for both Public Service Loan Forgiveness (PSLF) and end-of-term forgiveness. By understanding these rules, borrowers can manage their monthly repayments to their advantage. Unfortunately, Parent PLUS loans are excluded from the Saving on a Valuable Education (SAVE) program, which offers more generous repayment options.
### Double Consolidation
Completing a double consolidation can lower monthly payments by over 50%. This process involves consolidating Parent PLUS loans twice, creating a Direct Loan eligible for all income-driven repayment plans and Public Service Loan Forgiveness plans. However, this option also expires on July 1, 2025, and takes four to six months to complete.