Using a Reverse Mortgage to Pay off College Debt
Americans 60 years and older carry an average debt over $70,000, according to research by Experian. In some states, that amount is nearly double. Surprisingly, some of that debt is student loan debt. Approximately three million seniors are burdened with an average over $30,000 in student debt, and a portion of their Social Security benefits and tax refunds are being garnished because they are falling behind on their payments. A HECM (Home Equity Conversion Mortgage), or reverse mortgage could be the solution to pay off student debt.
Why are seniors faced with student loan debt when a repayment plan is generally 10 years? There are three typical scenarios for how they got to this point.
1. Carrying student debt for longer periods of time.
Though the typical student loan repayment period is 10 years, there are extended repayment periods from 20 to 30 years; which means some seniors who took out loans to finance advanced degrees, or stayed in school for extended periods of time, are bringing their student debt into retirement.
2. Taking on student loan debt to refresh or reinvent a career.
During The Great Recession in the late 2000s and early 2010s, many workers found themselves without a job, forcing them back to college or trade schools; relying on student loans to fund their education, and for some, their households.
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3. Co-signing student loans for children or grandchildren
In a report by The Consumer Financial Protection Bureau (CFPB), the most prevalent reason that seniors are carrying student loan debt into retirement is because they took out the loan themselves or co-signed for a child or grandchild.
The CFPB also reports that nearly 40 percent of student loan borrowers aged 65 and older are in default. Student loan debt is one that usually cannot be included in a bankruptcy. To help pay the debt, or make up the financial gap when their Social Security payments are garnished, seniors often turn to high-interest loans or credit cards. A HECM may be a better solution.
A HECM reverse mortgage lets homeowners over the age of 62, with a significant amount of home equity, use their equity to supplement their income. The funds can be used for anything, including paying off student loans. The home must be their primary residence, and they must be able to pay their insurance and taxes, as well as the upkeep of the home. A reverse mortgage offers borrowers financial relief so they can pay off their student debt without a monthly payment.
If you are struggling with student loan debt, and you think a reverse mortgage could be right for you, speak with a Certified Reverse Mortgage Professional who will help assess your situation and provide more information on the benefits of reverse mortgages.
Learn more about how people are using home equity conversion mortgages for purchasing homes:
Please keep in mind that the reverse mortgage industry in constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.