A recent article “Middle-aged borrowers piling on student debt” indicates individuals between the ages of 35-49 are amassing significant student loan debt as men and women enroll at postsecondary education institutions, mainly for-profits institutions, due to midlife career changes (Lipka, 2011). Student loan debt for the middle aged group has increase 47% with the average student loan debt increasing from $9,000 to 12,000. The article emphasizes the individuals seem oblivious to the fact that in many cases the retraining may not sufficiently provide the income level needed to repay the massive amount of student loan debt the person is accumulating.
The article has some very valid points concerning middle aged borrowers amassing significant student loan debt as they enroll at postsecondary education institutions. However, there are other economic factors that are contributing to the increase in student loan borrowing such as the loss of government subsidies. Many middle aged individuals have been laid off due to downsizing and forced to seek government assistance to cover their basic living expenses either through unemployment or TANF benefits. Recent state and federal legislation has impacted the unemployment and TANF programs causing many individuals to be ineligible for benefits. The unemployment and TANF benefits were the only source of income for many individuals because of the high unemployment rates and lack of job opportunities. Therefore, these individual have been forced to seek other means of support, student loans, even if the solution is only temporary.
While the mid-life career change may seem to superficially be the logical reason for the student loan debt increase, the loss of government subsidies is one of the imminent reasons many individuals enroll in postsecondary education institutions. Student can obtain subsidized and unsubsidized loans based on their economic status rather than their credit scores which alleviate the humility of the credit scrutiny of banks that will deny their loan applications because of their lack of employment. The student loan program allows the student to borrower the maximum amount of student loans funds available (in most cases)to cover their tuition and allow for a refund to be able to meet their basic needs, such as food and shelter, because they do not have any other means of support. The student is not concerned about paying the student loan funds back in the future; they are more concerned with their present situation and being able to maintain their standard of living.
From a financial standpoint, borrowers should be concerned about their student loan debt accumulation because it will definitely impact their student loan repayment responsibilities once they finish their education. However, at the same time, for many individuals the loss of employment and lack of income has already has so many adverse affects, such as foreclosure and lack of economic dignity, that the future consequences of not being able to repay their student loan pales in comparison. The borrower credit scores are already low due to not being able to pay their current debts and therefore, the “scare” of the student loan debt burden seems inconsequential. For right now, there is no short term solution for the middle aged student loan debt increases because it is a result of the recession that has caused the borrowers to seek student loan funding as a source of income rather than a source of education. Until the employment outlook becomes better, the amount of middle aged student loan debt will continue to increase.
