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Millions of Americans over 50 may benefit from Biden's student loan forgiveness plan

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Katie Lobosco and Tammy Ruby, CNN

Without his student loan debt, Lark Abelson would already be retired.

More than 20 years ago, the 63-year-old took out a $5,000 loan to earn an associate’s degree in computer technology from Warwick Community College in Maryland to try and make a difference for herself and her younger daughter. However, she was unable to find work in the field and continued to work in low-paying retail jobs, which left her unable to pay off her debts. defaulted several years ago.

Abelson, who lives outside Ocean City, Maryland, feared quitting her job and turning to Social Security because the federal government could withhold part of her monthly check to pay off her debts.

But the Federal Student Loan Debt Relief Plan announced by President Joe Biden in late August It gave Abelson new hope. She hasn’t checked her balance lately, but she thinks she’ll write off what she owes. She has been asked to be notified when she can apply for her pardon and has taken the first step to sign up for social security benefits.

Of the debt relief plan, Abelson said, “We know this is coming, so we actually started the process of claiming Social Security the day after Biden announced it.” .”

There are nearly 9 million federal student loan borrowers over the age of 50 like Abelson. About 20% of the approximately 43 million federal student loan borrowers.

When The number of older borrowers with student loan debt is increasing. Borrowers over the age of 50 have about 1.6 million more people with federal student loans now than they did in 2017, according to federal student loan data.

Not all older borrowers are eligible for Biden’s student loan forgiveness. To be eligible, his annual income must be less than $125,000 (or $250,000 for a couple). This is the same income standard for all borrowers. The borrower must also have a federal loan. Student loans are not covered.

Eligible borrowers can see up to $10,000 in student debt forgiven. Those who received Pell grants while in college are eligible for waivers of up to $20,000. Pell grants are awarded to millions of low-income students each year based on factors such as family size, income, and college costs.

There are several reasons older borrowers are still paying off their student loan debt. Some took out federal student loans to help their children pay for college, and while college prices are rising faster than inflation, others are still out of their education. You may be paying off your debt.

Also, if the borrower defaults, they may lose some of their Social Security benefits. In 2015, the most recent data available, the government cut Social Security checks for a total of 173,000 Americans of all ages, a 380% increase from her 36,000 in 2002.

Three-quarters of people over the age of 50 took out loans only for their education, and most had less than $10,000 in debt at the time of their first Social Security foreclosure.

Nearly 40% of federal student loan borrowers over the age of 65 are in default, according to a 2017 report from the Consumer Financial Protection Agency.

Some parents go into debt to help pay for their children’s college tuition

Parents can apply for what is called a Parent PLUS loan from the federal government to help pay for their children’s college. About 3.6 million people currently have outstanding Parent PLUS loans, more than her $107 billion in total, according to government data.

Parent PLUS loans first became available in 1980 and are intended to cover financial gaps when student loans do not pay in full. Parent loans typically carry higher interest rates than student federal loans and must be paid while the child is still in school, unless the parent requests a deferral.

When James and Mary Stone took out a federal Parent PLUS loan decades ago to help their two sons attend college, they didn’t think they would still be in debt in their late 60s. did.

The North Carolina couple have been making payments over the years and still owe $29,000. Just before the pandemic began, they were owing about $400 a month as part of an income-based repayment plan. was sending money.

After losing her webmaster job last year, Mary Stone sold her home and rented a small house so she could retire.

Having at least some of that debt forgiven would be a huge relief for the Stones, especially since he was diagnosed with cancer in May. I don’t know, but lower monthly mortgage payments will give them more leeway.

“It means I can focus my time and energy on taking care of my husband’s needs at home instead of taking a low-paying job to pay off this loan,” said Mary Stone. We mentioned that we are still fighting with ourselves. Student loans from college.

Some student debt balances explode over time

If the borrower stops paying the loan, the balance will continue to grow due to the interest. Unlike other debts, it is very difficult to discharge student loan debt in bankruptcy.

Franco Tompeterini is grateful to have his $10,000 student loan forgiven, but he wishes he would. In the 25 years since he graduated from college, his balance has ballooned to $88,000 and is still growing.

A US Air Force veteran who participated in Operation Desert Storm, Tonpeterini received a loan of approximately $34,000 so that he could pursue a bachelor’s degree at American National University after his discharge.

After making monthly payments for several years, Tonpeterini had to move back home to care for her aging parents. Unable to find work in his field, he took a lower-paying job and defaulted on loans for about a decade before entering his income-driven repayment plan about 15 years ago. . But the payment couldn’t even cover all the interest. So the amount of money he owed grew and grew.

The government offers several income-driven repayment plans that reduce monthly payments for borrowers struggling to pay off their loans. Income-driven plans generally cap payments at 10% of the borrower’s discretionary income.

Less payments can help borrowers avoid default, but monthly payments may not cover the interest they accumulate each month. In that case, the total outstanding debt will continue to grow. Biden plans to propose a new income-driven plan to cover unpaid interest by the government.

Tonpeterini’s student loan debt prevented him from buying a home or siphoning money at a bank.

“I really have no future,” said Tonpeterini, who lives and works as a property manager in Rogers, Arkansas. “When I turn 60, I should think about retirement and my future. , they are eventually canceled.

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CNN’s Jimin Lee contributed to this article.