Why Boomers Have the Most Student Loan Debt — And How They Can Shrink It Fast
The average student loan for boomers — those born between 1946 and 1964 — is a whopping $43,554. And even though they are an older generation, boomers’ student loan debt is more than the debt of any other generation.
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Find out why boomers have the most student loan debt and how they can bring it down quickly.
Reasons Boomers Are Leading in Student Loan Debt
Fred Amrein, a student loan repayment and college funding expert, CEO and founder of PayForEd, said that the reason boomers are leading in student loan debt is related to the financial aid process.
“The traditional dependent student can only get $27,000 in their own name over the first four years,” said Amrein. “The balance needs to be funded by either savings or cash flow. At today’s college cost, not many families can afford that.”
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So what do parents do? They take out loans for their children.
“Under the current rules and limits the parents have two major borrowing options, Private loans or Federal Loans,” Amrein said. “Either way the parents will need to cosign for the private loans, or under the Parent PLUS option, it is legally their responsibility.
Problems With Parent PLUS Loans
A Parent PLUS loan might seem like the perfect solution to pay for your child’s college, but not when it comes time to repay it.
Funding Is Easy To Get But Repayment Is Expensive
“If you have fair credit, the Parent PLUS loans have limits up to the full cost of attendance for that school,” Amrein explained. “So it is easy to get the funding. The problem is when repayment starts, these [loans] become very expensive, which is not explained to the parents or the student.
And you definitely don’t want to default on your student loans. “They can garnish wages, tax refunds and Social Security to name a few,” Amrein said.
The Loan Can’t Be Transferred to the Student
Amrein also said that many parents believe that a Parent PLUS loan can be transferred to the student. However, he said, that’s not true.
The Office of Federal Student Aid states on its website that Direct PLUS loans — also known as Parent PLUS loans — made to a parent cannot be transferred to the child. So, unfortunately, parents are on the hook for payments.
They Have Limited Repayment Options
Amrein said there’s a loophole in the repayment system that expires July 1, 2025, but it takes four to six months for borrowers to complete the process.
How Can Boomers Reduce Student Loan Debt Quickly?
Reducing student loan debt quickly can be a challenge for boomers because they have limited time to save for retirement, Amrein explained. He said that they need to have a full understanding of their cash flow before and after retirement to determine what repayment options are available.
Loan Forgiveness Is an Option
“Parent PLUS loans qualify for both Public Service Loan Forgiveness (PSLF) and end-of-term term forgiveness,” Amrein said. “By understanding these rules, borrowers can manage their monthly repayment to their advantage.”
Unfortunately, Parent PLUS loans have been left out of the Saving on a Valuable Education (SAVE) program, which is a more generous repayment option than what’s currently available to Parent PLUS loan holders.
Double Consolidation
“If you have Parent PLUS loans, completing the double consolidation could lower your monthly payment by over 50%,” said Amrein. However, he pointed out again that this option expires on July 1, 2025, and takes four to six months to complete.
Double consolidation is when a borrower consolidates their Parent PLUS loans two times — hence the long completion period — which creates a Direct Loan that’s eligible for all available income-driven repayment plans and Public Service Loan Forgiveness plans.
However, there are some risks to the double consolidation option, including losing past payment credit on your loans. Consider speaking with a nonprofit agency, like The Institute of Student Loan Advisors, which offers free, fair student loan advice and dispute resolution, to find out if double consolidation might be right for you.
Other Options for Reducing Student Loan Debt Quickly
If you don’t qualify for the limited loan forgiveness options and don’t opt for double consolidation, here are a few other options to consider.
Debt Avalanche Method
The debt avalanche method is when you put more money toward your higher-interest debts to pay them off faster while still paying at least the minimum payments on your lower-interest debt obligations.
Make Additional Payments Whenever Possible
Consider making additional payments on your student loans with any bonuses, cash windfalls or other extra income that comes your way.
Take On a Side Hustle
If you have the time, take on a side hustle to make extra cash that you can put directly toward your student loan debt. According to Side Hustle Nation, 24% of baby boomers in the U.S. have a side hustle, and the average side hustle brings in an extra $1,122 per month.
The Takeaway
Amrein said that applying for student loans is the largest financial decision we make on our own.
“A mortgage or auto loan has a third-party approval process,” he said. “With Parent PLUS loans, there is no formal underwriting. The system is built on access, not affordability. That is the problem.”
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This article originally appeared on GOBankingRates.com: Why Boomers Have the Most Student Loan Debt — And How They Can Shrink It Fast
