ICFE
ICFE eNEWS #17-01 - January 9th 2017
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CFPB releases report on student loan debt owed by older consumers

By John L. Culhane, Jr. on January 5th, 2017

The CFPB has released a new report, "Snapshot of older consumers and student loan debt," that provides statistics on the growing number of consumers age 60 and over (older consumers) who owe student loan debt and the growing amount of such debt. The report also discusses complaints about student loan debt submitted by older consumers to the CFPB from March 2012 to December 2016. According to the CFPB, the report can offer insight to policy makers examining "potential changes to the higher education finance market, including changes to federal student loan programs," as to "how changes in the availability of borrowing and repayment options may affect the long-term financial well-being of older consumers."

The report includes the following statistics:
• The number of older consumers with student loan debt quadrupled from 2005 to 2015, increasing from about 700,000 to 2.8 million consumers.
• The average amount of student loan debt owed by older consumers roughly doubled from 2005 to 2015, increasing from $12,100 to $23,500, with older consumers owing a total of $66.7 billion in student loan debt as of 2015.
• Based on the CFPB's analysis of survey data, 73 percent of older student loan borrowers (which appears to include co-signers) report that their student loan debt is owed for a child's and/or grandchild's education.
• The proportion of delinquent student loan debt owed by older consumers increased from 7.4 percent to 12.5 percent from 2005 to 2012, with 37 percent of student loan borrowers age 65 and older in default in 2015.
• The number of borrowers age 65 and older who had their Social Security benefits offset to repay a federal student loan increased from about 8,700 to 40,000 borrowers from 2005 to 2015.

The report indicates that as of January 1, 2017, consumers 62 and older submitted approximately 1,100 student loan complaints and approximately 500 debt collection complaints related to student loans. (Based on the CFPB's December 2016 complaint report, the CFPB has received a total of 33,713 student loan complaints since July 2011. The report did not break out the number of debt collection complaints that were related to student loans.)

According to the CFPB, issues described in complaints submitted by consumers 62 and older included the following:
• Servicing practices that delay or prohibit enrollment in income-driven repayment (IDR) plans or limit the consumer's ability to reduce his or her monthly payments when the consumer's income changes, such as the servicer not advising the consumer about the ability to have monthly payment amounts reassessed under an IDR plan when income is reduced
• Misallocation of co-signer payments to other loans owed only by the primary student borrower which may cause the co-signer's payment to appear short and result in late fees and interest as well as reporting of late or missed payments to consumer reporting agencies
• Difficulties in obtaining a co-signer release or accessing account information needed to monitor the account
• Offset of the consumer's Social Security benefits following a default on a federal student loan despite the consumer's right under federal law to make income-based payments to rehabilitate the loan
• Threats by debt collectors to collect on federally-protected benefits to repay private student loans

The report includes several suggestions and recommendations including:
• Review of the co-signing process for private student loans "to understand whether the origination process fully brings to the attention of older co-signers that they are taking on liability for the debt"
• Streamlined access to IDR plans for older borrowers whose only source of income is Social Security


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Sent by:

Paul S. Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)


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