As Arizona residents get older, many have started planning their retirement. But a surprising new report by the Government Accountability Office reveals that debt among senior citizens has risen exponentially since 2005 and that a majority of that debt is related to student loans for senior citizen's own education rather than their children's.
According to the report, debt held by Americans age 65 and older has risen from $2.8 billion in 2005 to $18.2 billion in 2013. Educational loans account for more than 80 percent of that debt. Even though senior citizens were less likely to have outstanding loans, they were also more likely to be delinquent on them.
Debtors unable to make their payments on time not only suffer the emotional trauma of financial difficulties and creditor harassment, but also garnishment from various income sources including wages and even Social Security payments. The report also states that more than 150,000 Americans had their Social Security garnished in 2013 to make payments for their student loans.
Senior citizens also hold more credit card and mortgage debt than their younger counterparts, but for senior citizens with fewer assets, student debt can be more devastating as bankruptcy can discharge unsecured debt but not student loans. Therefore, financial experts predict the number of elderly debtors defaulting on their student loans will increase over time.
Even though student loans are generally not dischargeable in bankruptcy, it is possible for Arizona residents to protect themselves against asset forfeiture and wage garnishment by filing for bankruptcy. Bankruptcy can be used to discharge the remainder of their debt, thus freeing up funds to make student loan payments.
Source: The Fiscal Times, "The debt that's robbing seniors of their Social Security," Beth Braverman, Sept. 22, 2014