Sunday, September 16, 2018

Using Social Security to Pay Off Student Loans

By early next year, if the creek don't rise and the US Congress does not mess with Social Security, I expect to have paid off loans for my daughter's university education. She started classes in 1994, so only about 25 years to retire the debt.

I am not the only one. Last year the Consumer Financial Protection Board reported that "people age 60 and older had amassed nearly $67 billion in student loan debt, with the average amount owed being $23,500 — nearly double the average a decade earlier. The bulk of the loans were used to pay for children’s or grandchildren’s education …"

I am, literally, using my monthly social security check to pay off the student loan. (Fortunately, I have other income to live on.)

I don't regret taking the loan. She received an excellent education which has been beneficial to her career.

What irritates me is the games the politicians play with student loans. For example, my interest rate, set by the federal government, according to my loan servicer Navient, is 6.625% -- at a time when the best bank savings rates don't even pay 2%. There have been proposals in Congress to halve the student loan rate, but they go nowhere.

And student loans are about the only debt that cannot be discharged in a bankruptcy. (Congress changed that in 1978.) Not that I would go that route. But there are plenty of people who could use such relief so they don't lose their homes.

I find it curious that in the online information about my loan, Navient never shows what I have paid to date nor the interest paid. They probably know how mad it would make borrowers. I had to ask for the information -- fortunately by email, not some phone call with an interminable hold. Turns out that on an original loan amount of $28,000, I've already paid $48,000 -- and I still have $9,000 to go. So when it's all done, I will have paid more in interest than the original loan.

In one respect, I was lucky. At the point in 1994 when my daughter received her acceptance letter from the university, I had just lost my job (company taken over by a corporate raider and broken into pieces). Because student aid was based in large part on "need," she was awarded multiple scholarships and grants the first year, reducing the amount I paid. Shortly after submitting the aid request, I got a new job (in fact, near where she was going to school).

I appreciate also that she took some summer classes, accelerate her schedule, and graduated a half-year early, saving me about $10,000. She also had her own loans.

In many countries in Europe, university education is free or very low cost. The quality is very high. There is a recognition that an educated, informed populace is good for the economy and especially when choosing leaders and strategic direction. In the US, university education has become a money machine for the schools and the lenders. It's time for a re-think.

https://www.mastersportal.com/articles/405/tuition-fees-at-universities-in-europe-in-2018-overview-and-comparison.html

https://www.mastersportal.com/articles/1042/tuition-free-universities-in-finland-norway-and-germany-in-2018.html

No comments:

Post a Comment