Going back to college as a grown adult is a big decision.
In the long run, the skills and knowledge acquired from additional education can help land a higher-paying job. The question is if the temporary costs and time constraints of paying for classes will provide a satisfactory return on investment.
[CLICK HERE to read the article, “Important Money Tips for Older Adults Going Back to College,” from U.S. News & World Report, Sept. 9, 2015.]
Before using current assets to fund either your own education or the education of a child or grandchild, we encourage you to meet with a financial professional first. While the initiative to seek higher education is admirable, it’s also important to ensure that your objectives do not circumvent your long-term financial goals.
After all, there are ways, including auditing or taking online classes, to help procure the knowledge you seek for yourself or a loved one without adversely impacting your retirement income goals.
[CLICK HERE to read the article, “Free School: A Secret Benefit for Seniors,” from Senior Planet, Aug. 5, 2014.]
[CLICK HERE to read the article, “Grants for Adult Students,” from CollegeScholarships.org, 2016.]
[CLICK HERE to read the article, “Class of Now: Reasons to Go Back to School,” from SeniorResource.com, 2016.]
The increase in people paying for college later in life has translated to a higher amount of debt for today’s pre-retirees and retirees. Economists at the New York Federal Reserve recently published a report revealing that older Americans held significantly more debt in 2015 than they did in 2003.
In fact, the amount of debt among borrowers between the ages of 50 and 80 has increased by about 60 percent. While mortgage debt, home equity lines of credit, auto debt and credit card debt have stayed relatively flat for this demographic, student loan debt has increased substantially.
[CLICK HERE to read the article, “The Graying of American Debt,” from Federal Reserve Bank of New York, Feb. 24, 2016.]
In another report, the Government Accountability Office (GAO) released the following data regarding this issue.
- 27 percent of loan balances held by those aged 50 to 64 was for their children
- The remaining 73 percent was for their own education
- Among the next-older age group, 82 percent of the loan balances was for the borrower’s own education
The GAO report also indicated that older Americans are more likely to default on their student loans than younger co-eds. While 12 percent of federal loans held by borrowers aged 25 to 29 were in default, more than twice that (27 percent) were held by borrowers between the ages of 65 and 74. Among people age 75 or older, more than half their student loans were in default.
[CLICK HERE to read the report, “Older Americans: Inability to Repay Student Loans May Affect Financial Security of a Small Percentage of Retirees,” from Government Accountability Office, Sept. 10, 2014.]
As if having student debt during retirement isn’t already a challenge, the federal government can garnish Social Security benefits to repay the loan. The number of retirees who had their Social Security benefits garnished to pay for student loans increased sixfold from 2002 to 2013.
While the problem is no doubt worrisome for retirees or near-retirees carrying a large load of student debt, this is by no means a mainstream issue. If you feel the urge to enroll in classes and further your education, you shouldn’t be deterred by the financial challenges others have endured.
However, it does emphasize the need to carefully assess your assets, your future earning potential and your timeline for repayment before you apply for student loans for yourself or a loved one. Feel free to speak with us if you have questions about how tuition may fit into your retirement income strategy.
We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives.
The information contained in this material is provided by third parties and has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.
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