A new report from the Federal Reserve Bank of New York reports that $36 billion in student loans falls on the backs of Americans who are 60 and older.
More than 10 percent of those loans are delinquent, and The Washington Post reported that some senior citizens are using Social Security checks to pay debt collectors.
“I have to believe that most of those loans were taken out on behalf of a child or a grandchild,” Jayme O’Donnell with Evergreen Financial Advisers said. “You’re going to have a percentage of those where people may have lost their jobs who decide to go back to school. I have seen an increase in that, but I don’t think the majority is related to that.”
Two-thirds of people with student loan debt are below the age of 40, she said.
According to CNN Money, total student loan debt has reached $1 trillion.
But most people have a “reasonable” amount of debt, and the situation isn’t likely to become a repeat of the recent mortgage crisis, financial industry leaders said.
The average amount of student debt in 2010-11 was $27,200. That’s a 54 percent increase in a decade, according to Finaid.org and CNN Money.
Only about 10 percent of borrowers have more than $45,000 in debt, CNN Money reported.
The majority of the student lending comes from the federal government, and the amount undergraduates can borrow is usually capped at $31,000, also according to CNN Money
CNN Money reported that, according to the U.S. Department of Education, in the fall of 2010 there were 22 million undergraduate and graduate students in college.
That number is up from 19 million in 2008, CNN Money reported.
At UTC, the average loan debt for an undergraduate is $21,812, Julae Grosz, associate director with UTC’s financial aid office, said.
For graduate students it is $39,149.
“At UTC, 49 percent of students took out student loans during the current academic year,” she said. “We have seen an increase in student loan borrowing and student loan debt levels at UTC. Unfortunately, this is in line with the national trend on student loan debt.”
O’Donnell said it is important for anyone considering borrowing money to pay for school to do research and weigh the pros and cons.
She doesn’t think it makes sense to borrow $100,000 to be a social worker who likely won’t make more than $35,000 a year.
“Go to an affordable school to get that degree,” she said. “If that’s what you want to do—great, but think about the process you’re going through. You might make the decision to live at home and get that degree at UTC,” instead of paying to go away to a private school.
Grosz said students need to remember that they will be responsible for paying back the money they borrow and that they should map out a payment plan and know how much they owe.
“Student loan borrowers need to understand that there are serious consequences if they do not pay their loans back,” she said. “For example, they may not be able to buy or rent a house/apartment; the government can withhold their tax refund or even have garnish their wages. It is important for students to know that the Financial Aid Office can help direct them where to go if they find themselves in a situation where they cannot make their loan payments. The worst thing they could do is to just not pay their student loan payment.”
To track student loan debt, click here.
Area resident Josh Davis, 34, said he has $17,500 in student debt after graduating from Middle Tennessee State University. He majored in recording industry management and got a minor in marketing.
He said he pays $151 every month in efforts to pay it off. He isn't sure how long it will take for him to pay it all off, but he's already been paying for eight years. And if he could go back and do things differently, he would.
"If I had it to do over again, there is no way I would go to college," he said. "I would have learned a trade through an apprenticeship or a two-year program where I could have worked more and paid my way through school."
Updated @ 8:41 a.m. on 04/04/12 for clarity.
Updated @ 9:06 a.m. on 04/04/12 for clarity.
Updated @ 9:14 a.m. on 04/04/12 to add more information as it became available.