The Silver Tsunami of Student Loan Debt

The issue of student loans affects every generation, regardless of age. However, a new study by the New School’s Schwartz Center for Economic Policy Analysis shows the effect of student loan debt on borrowers who are fifty-five and older. This as the Biden administration continues to face opposition to the SAVE plan and student loan forgiveness.

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Key Points:

The blog post discusses the growing crisis of student loan debt, particularly among older adults, often referred to as the “silver tsunami.”

• The blog post discusses the growing crisis of student loan debt, particularly among older adults, often referred to as the “silver tsunami.”
• There is a substantial increase in student loan debt among individuals aged 50 and older.
• The burden of student loan debt results in a higher default rate and impacts retirement savings.
• While steps have been taken by the Biden administration, it is still difficult to discharge student loans in bankruptcy.
• Republican-led states continue to oppose and file lawsuits against student loan forgiveness and the SAVE plan that could help alleviate the burden on older Americans.

The report’s key findings are that more than 2.2 million people over the age of fifty-five have student loans. Forty-three percent of that age group is in middle-income brackets. They are also make up the highest proportion of all student loan borrowers.

The analysis supports government policies to minimize the impact of student loan debt and prevent the garnishing of Social Security benefits to repay student loans.

The report argues the position that while publicly, the belief student loans are an issue for younger borrowers, its effect on those fifty-five or older makes it more difficult to save for retirement and more likely to depend on public assistance.

At that age bracket, the benefits of education are reduced, so policy interventions are needed, such as the Saving on a Valuable Education (SAVE) Plan proposed by the Biden administration to counteract those results.

Also, more than 1.4 million workers and over 820,000 unemployed people aged 55 and above have outstanding student loans attributed to either them or their spouses. Half of all debtors over age 55 still in the labor force are in the bottom half of income-earners, earning less than $54,600.

Fifteen percent of workers between the ages of 55 and 64 and more than 17 percent of those over 65 did not complete their degree but have student loans.

Lawsuit to Prevent Student Loan Forgiveness

I previously wrote about the ridiculousness of seventeen states joining a lawsuit to prevent the Biden Administration from forgiving student loans. My argument was both legal and logical.

From a logical perspective, student loan forgiveness would only help those states. As the study confirms, a diminished earning capacity could result in student loan borrowers seeking public assistance. This doesn’t benefit the state in any way. The more people needing public assistance, the more the state has to tap into taxes.

I also argued that it may result in borrowers leaving the state if their state denies student loan forgiveness or even taxes them for forgiveness, like Indiana. The opposite, and the financially beneficial option is as Governor Pritzker of Illinois has done with the Smart Buy program that wipe out $40,000 in student loans with the condition a home or purchased. There are other down payment assistance programs available for Illinois residents. California has also taken steps with a pilot program, an idea I mentioned one day in class, to reduce student loan debt by providing charitable work or offering services at a reduced rate to those in need. I believe this idea would benefit all parties involved.

• Find Out Which States Oppose Student Loan Forgiveness

Common sense dictates, well, common sense isn’t all that common. But suppose a borrower can save $500 monthly because of student loan forgiveness by relocating to another state. Also, suppose that the state has lower property values and cost of living, saving $250 per month. In that case, that’s already $750 per month a student borrower is saving. That means a borrower can work at a job earning $9,000 less per year and still be in the same financial position as before.

If the borrower works a mobile job and can work from home, so there’s no change in income, now the borrower has $9,000 more at the end of the year that can be used towards retirement, a new home, or a car. Guess what? The new home or car is taxed. Who benefits from that tax? The state!

The more homes bought in the city, county, or state, the more property values rise. The higher the value of the property, the higher the taxes! The more taxes are received, the more funds are available for other necessities, whether public school education or law enforcement.

So, to see these states arguing against a benefit to their residents is incredibly stupid, especially for political talking points. Politicians know this doesn’t benefit their state. But they are hoping voters don’t know. Talk isn’t cheap!

Of course, my favorite is still Alaska, which provides an annual stipend for residents from the Alaska Permanent Fund. Last year, each resident, including children, received $1,312 from Alaska’s Department of Revenue.

So, a family of four receives $5,248 annually, and if the figures remain consistent over twenty years, that’s $104,960 they have received for literally doing nothing. Maybe I’m wrong, but that seems like an “entitlement.” It’s also twice the average student loan debt owed by those fifty-five years old or older. Yet, Alaska opposes student loan forgiveness.

• Podcast- The Financial Impact of Student Loans

Besides, the stupidity of arguing against a state’s residents for student loan forgiveness and the SAVE plan when states will only benefit financially is the simple legal fact that these states don’t have standing.

Standing means there has to be an impact on that state or even individual to file a lawsuit, in this case, with student loan forgiveness. Several courts have already ruled on the standing issue, telling these states they don’t have skin in the game.

Here’s another thought to consider. Whether it’s attorneys employed by the state, although usually it’s private law firms contracted by the state, it costs money to litigate these issues. Hundreds of thousands of dollars paid for by whom? Residents of the state with their tax dollars! Talk about a double whammy!

Biden’s SAVE Plan is from the federal government. Biden doesn’t run states. He has zero legal authority. That’s what governors are for. Yet, states are jumping into a lawsuit to prevent the federal government from spending federal dollars how they see fit. Yet, those same federal dollars benefit that state’s residents and, ultimately, the state. Do you see the stupidity behind these lawsuits?

It’s a perverse view of state’s rights where states are separate from the federal government and are run as their elected officials see fit.

So imagine if the Biden Administration told one of these states it can’t spend money on a new sports stadium or art center. You don’t have to waste your time imagining it because it’s a legal impossibility, and yet, that’s precisely what the states are doing with the federal government.

Those hypocritical states that are cutting off their collective noses to spite their political faces are:

Alabama, Alaska, Arkansas, Florida (some of us like to say Flori-duh), Georgia, Idaho, Iowa, Louisiana, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, Texas, and Utah. For the record, these are all Republican-led states.

Here’s something to consider: I wonder how many Republicans in those states oppose student loan forgiveness, but it’s all good with forgiving their COVID-19 relief funds for their businesses. Have I mentioned hypocrisy yet?

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