President Joe Biden has pledged that there will be more loan forgiveness in the months to come. As he made this promise, a retired couple is faced with nearly $100,000 in student debt, and they are unsure of their ability to clear it.
Albert and Jil Martinez
Albert Martinez, a retired lineman who lives in Arizona, opted for a parent student loan in 2010. He was employed when he took out the loan. He did so because he wanted to support his two sons through college.
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More than ten years later, the burden of a $96,000 loan weighs heavily on Albert and his wife Jil. They feel this weight more now that they rely on fixed retirement incomes.
Retirement
Albert, who retired from AT&T in 2018 at 58 after four decades of service, saw retirement as a relief from the physical toll of work. However, according to Jil, he hadn’t intended to retire so early.
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Now, in 2024, they find themselves retired with a fixed income and a lingering student loan at an 8 percent interest rate. Despite applying for various programs to reduce interest or expenses, most have rejected them due to their income level, Jil says.
Uncertainties Associated With Student Loan Debt
“Retiring was a blessing since the work was taking a significant toll on him physically. But he never wanted to retire that early,” Jil said.
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Jil stated that despite applying for various available programs aimed at reducing interest or costs, they have been denied most of them due to their income level. “He never anticipated that the loan would increase so dramatically and keep increasing,” Jil remarked. “We’re uncertain about what occurred. It seems like our country is just taking advantage of us.”
Effects of the Current Economy
The Martinezes managed to decrease their monthly payments from $1,000 to $638. Yet, even this reduced amount poses a challenge as they strive to manage their finances amidst the current economic conditions.
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Jil emphasized the challenge of retiring early, highlighting the need for their finances to endure longer. She stressed their commitment to repaying the loan. “Albert is not looking for handouts. He wants to see the interest rate lowered to make it easier to pay down the loan.”
Eliminating a Near $100,000 Student Loan Debt
Today, both Jil and Albert have taken on part-time work to manage payments. Even with the jobs, they harbor little optimism about entirely eliminating the nearly $100,000 debt.
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Jil expressed doubt about ever clearing the loan, citing its daunting size. “He will never be able to pay off this loan,” she said. “It just is not possible.”
Paying Student Loan Debt in Retirement Years
The Martinezes’ are not the only ones facing this predicament. Many retirees are struggling with ongoing loan obligations, particularly student debt loans. These debts are either for themselves or their children. Most times, they find that their retirement years include monthly loan repayments.
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According to Alex Beene, a financial literacy instructor in Tennessee, retirees burdened with student debt are more prevalent than commonly believed. And he believes that, unfortunately, the trend is expected to worsen.
The Cost of Education
Over the past three decades, both young undergraduates and seasoned professionals have witnessed a steep rise in the price of their degrees, Beene explained. Consequently, record numbers of Americans are anticipated to retire with outstanding student debt loan balances.
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Despite this financial strain, many retirees cannot or don’t want to forego their retirement. While part-time work is a possible solution, it often can’t help them keep up with the interest rates.
Parent PLUS Loans
Alex Beene pointed out that while the current situation may not be ideal, the reality remains that the debt is persistent, and retirees facing it must find ways to make their remaining payments.
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For those who have taken out Parent PLUS loans, the implications of their debt can be more troubling. This is because their group has been excluded from national forgiveness programs. They also have some of the highest interest rates associated with these student debt loans.
Financial Assessments For Loan Repayment
According to Nadia Vanderhall, a financial planner at The Brands and Bands Strategy Group, many parents were lured into obtaining Parent PLUS loans.”Most parents were pulled into getting Parent PLUS loans.
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The thing with these loans is that you have the same financial assessment that you would have in other loans, but do not have for Parent PLUS/private loans. This allowed them to borrow excessive amounts without an adequate assessment of how they would pay back.” Nadia.
Inadequate Funds
Along the line, things become difficult much later. This is because, as many parents enter retirement, making those monthly payments will be difficult because they no longer have the funds they once had.
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Presently, Parent PLUS loans maintain some of the highest interest rates available. These borrowers, most of whom are over 50, are carrying significant amounts of student debt. And they are emerging as one of the fastest-growing demographics in the student loan landscape.
A Continuous Increase in Student Loan Debt
According to Value Penguin, individuals aged 60 and above have witnessed a staggering 1,256 percent increase in student loan debt since 2004. In 2004, this same age group only held $6.3 billion in student debt.
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“The income they initially had when they acquired their loans may not align with their retirement income,” Vanderhall noted. “Most of them rely on Social Security, and fixed income doesn’t match what they could afford when they first took out the loans.
Student Loan Debt Forgiveness
Additionally, medical expenses in retirement could further hinder older borrowers’ ability to enjoy their golden years, as they continue to carry these loans along the path of financial uncertainty.
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Thousands of borrowers have already experienced debt forgiveness through Biden’s recent loan adjustments. In a recent announcement, the president announced that an additional 74,000 borrowers would receive an extra $5 billion in relief.
Eligibility For Debt Forgiveness
This number of borrowers eligible for student loan forgiveness includes over 40,000 individuals employed in public service. Those who made consistent payments for at least 20 years under income-driven repayment plans are also included.
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Joe Biden, emphasized that his administration’s actions addressed shortcomings in student loan programs. “My administration is able to deliver relief to these borrowers and millions more. This is because of the fixes we made to the broken student loan programs that were preventing borrowers from getting the relief they were entitled to under the law,” he said.
A Lesson For Others
Following the multi-year pandemic pause, student loan payments resumed in October. This became a challenge for many borrowers, as they were struggling to make their payments. The national student debt has reached 1.75 trillion and shows no signs of reducing.
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The Martinez family, however, hopes their experience serves as a lesson for others. Jil emphasized the importance of avoiding parent student loans and any other loans. “Do not take out parent student loans, or any others for that matter. It’s a money-making scam, she said.”