MONEY

Student Aid Company Fined for Its Sales Practices

Graduates with $$ on their caps
Mark Scott—Getty Images

The company allegedly earned money from 200,000 charges to customers who were no longer using their financial aid services.

A company that charged families for help in filling out the Free Application for Federal Student Aid (FAFSA) engaged in deceptive sales and billing practices, according to a complaint filed today by the federal Consumer Financial Protection Bureau (CFPB).

The bureau says that Student Financial Aid Services, Inc. used its websites—FAFSA.com and SFAS.com—to lure customers with misleading information about the cost of its services and then it charged them automatic, recurring annual fees. Under the CFPB’s order, the company would be fined $14.5 million for the alleged violations. Full payment will be suspended if the company meets certain obligations, including paying $5.2 million in refunds.

FASFA is the U.S. Department of Education’s form to apply for financial aid, and it’s also used by many states and colleges to determine students’ eligibility for aid. The official website, FASFA.ed.gov, is run by the government. But the similarly named FAFSA.com was owned by Student Financial Aid Services, Inc. from at least July 2011 until earlier this month, when the web domain was turned over to the Education Department.

On its website, SFAS offered paid FAFSA preparation that included access to an experienced financial aid adviser who would answer questions about the financial aid process, according to the CFPB complaint. The company charged consumers up to $80 for online FAFSA preparation and as much as $100 for help over the phone.

Two of the company’s programs put customers on a renewal plan that charged their accounts for subsequent years, regardless of whether they continued to use SFAS’s services. But those terms weren’t clear to consumers when they signed up for the services, according to the CFPB.

In its five years of operation, SFAS collected money from about 206,000 accounts of customers who didn’t use the company to file a FAFSA that year. The recurring fees ranged from $67 to $85 and were charged to consumers’ cards or bank accounts for up to four years, unless they actively asked to be taken out of the program.

To take effect, the CFPB’s order needs to by approved by a U.S. District Court judge in California, where the complaint was filed.

In an emailed statement, SFAS denied any illegal activity or wrongdoing, saying that the CFPB hasn’t provided evidence to support its claims and that it settled with the bureau to avoid drawn out legal action.

“SFAS is not aware of a single consumer complaint to the CFPB about its services,” the statement reads.

The move against SFAS marks the second CFPB action in the student financial aid industry in as many days. On Wednesday, the bureau announced an $18.5 million payment from Discover Bank to settle allegations that its student loan servicing and debt collection practices were illegal. The bureau said Discover overstated the minimum amount due on borrowers’ statements, misrepresented information about tax benefits available to borrowers, and called borrowers, sometimes excessively, in the early mornings and late at night. Of the fine, $16 million will go toward refunds to the borrowers.

For MONEY’s advice on paying for college and our latest college rankings, check out the new MONEY College Planner.

 

 

 

 

TIME College

Parents Are Shelling Out More Money For Kids to Attend College

Proposed Budget Cuts Threaten Funding For California Universities
David McNew—Getty Images Students go about their business at University of California, Los Angeles (UCLA).

More financing from the Bank of Mom and Dad

Parents opened their wallets more generously in the 2014-2015 school year, a report shows, reclaiming their place as the primary source of college funding for the first time since 2010.

Parental income and savings now cover 32% of college costs, surpassing scholarships and grants as the largest share of college funding, according to the How American Pays for College 2015 survey, released by Sallie Mae. The percentage of college funding contributed by parents’ savings and income had hovered at and below 30% since it nosedived from 37% in 2010.

Parents are paying more for college in part because it’s costing more. The amount that families spent on college rose to an average of $24,164 this year — a 16% gain from $20,882 in 2014.

But the increased wallet-opening isn’t just linked to rising tuition. Parents are less worried about a volatile economy impacting their ability to pay for college. Only 17% of parents reported extreme concern that losing a job would impact their income, compared to 23% in 2014. In 2015, 62% of families eliminated potential colleges because of the cost, down from 68% in 2014 and the lowest percentage since 2009. The financial worries of parents — which were at record levels in 2010 as loan rates rose and the value of savings diminished — had eased significantly by 2015. Whereas a quarter of parents in 2010 recorded “extreme worry” about college costs because they were concerned about the value of their homes, only 6% said the same in 2015.

In addition to parental income and savings, 30% of college funding, on average, came from grants and scholarships in 2015, while 16% came from student borrowing, 11% from student income and savings, 6% from parental borrowing, and 5% from friends and family.

Despite the widespread coverage of student loan burdens, the majority of families did not take out loans to pay for college. When they did, the students were the ones who signed the dotted line three-quarters of the time. Families with students enrolled at private four-year colleges were far more likely to borrow (with 56% taking out loans) than those in four-year, or two-year public schools, where 43% and 22% of families took out loans, respectively.

MONEY

Families Are Paying More for College…and That’s a Good Thing?

graduation cap mortarboard on top of pile of cash
Getty Images—Getty Images

Mom and Dad have started kicking in more cash, a possible sign of greater confidence in the economy.

Talk about looking on the bright side. A new survey says families spent more on college last year, and that could be a good thing.

Sallie Mae’s annual “How America Pays for College” survey does indicate that families spent more, in part, because college costs continue to rise. But the fact that contributions from parent income and savings increased by an average of $1,391—more than any other source of college funding—suggests they’re becoming more willing to part with their precious cash. Coupled with survey results showing families less worried about job losses and falling home values, that could be a sign of an improving economy, according to the study.

The survey found that families paid $24,164 on average toward college in the 2014-15 academic year, up 16% from last year and the first statistically significant increase in the past five years.

Increased spending was consistent regardless of the type of school or a family’s wealth. But the $24,164 average still conceals a lot. Families with students at four-year private colleges, for example, spent the most at $41,857—almost double what families spent on four-year public schools ($23,189) and more than triple the figure for two-year schools ($13,531).

For families earning more than $100,000, parent income and savings covered 45% of college costs, compared with 28% for the middle-income families and just 20% for families earning less than $35,000.

Four out of 10 families said they took out loans to pay for college, and the average amount they borrowed was also higher than last year.

Interestingly, the survey suggests that families who borrowed didn’t do so for basic access to higher education, but so that their student could attend a more expensive college. Borrowers spent a third more on college than those who didn’t borrow, and their students were more likely to be enrolled in private colleges.

The numbers are based on the responses of 1,600 families with at least one 18- to 24-year-old college student.

For advice on paying for college and our latest college rankings, check out the new MONEY College Planner.

MONEY College

How to Go to College for Free

At one of MONEY's Best Colleges, students are graduating with zero debt.

Instead of paying tuition, students at College of the Ozarks in Point Lookout, Mo., work at one of over 100 different on-campus jobs. The 1,000-acre campus has dairy, hog, and beef farms; a hotel; a fine dining restaurant; a farmers market; and much more. The cost to educate a student is approximately $18,000 a year, which is defrayed by students’ work, grants, scholarships, and donations and endowments to the school. The school doesn’t accept private or federal loans. In addition to a diploma, students graduate from college with a strong work ethic and real-world skills desirable to employers.

Read next: Check out MONEY’s 2015-16 Best Colleges rankings

MONEY Student Loans

How Student Loans Are Pushing College Tuition Costs Even Higher

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The dramatic widening of college aid programs during the past decade may have done more harm than good by fueling college tuition inflation.

Do student loans help students or colleges? A new paper published by the New York Federal Reserve makes a clear, and depressing assertion: Federal student loans and grants are often simply gobbled up by schools through tuition inflation, leaving the students no better off.

More dollars chasing the fewer goods cause prices to rise. That’s both a standard economics principle and an often obvious, but punishing reality. During the housing bubble years, the more banks lent potential home buyers, the more prices rose, as consumers with bigger and bigger borrowing power bid up prices. Larger loans weren’t the only factor, but they were a big one.

The new paper, called “Credit Supply and the Rise in College Tuition,” posed an intriguing question: Is this same phenomenon happening in college? Has a dramatic widening of college aid programs during the past decade, chiefly through loans, done more harm than good by simply fueling college tuition inflation? It’s a depressing possibility, the idea that wider availability of student loans haven’t helped students, they merely helped colleges — something called the “passthrough effect.”

“From a finance perspective, the market for postsecondary education has shared several features with the housing market in the past few decades…. resembling the twin house price and mortgage balance booms,” the authors write.

Here are the basics, according to the paper: Yearly student loan originations grew from $53 billion to $120 billion between 2001 and 2012. Meanwhile, average sticker tuition rose 46% in constant 2012 dollars between 2001 and 2012, from $6,950 to $10,200.

That’s a pretty compelling parallel, though as is often the case in economics, it’s not quite so simple. There’s the correlation/causation problem. Did more loans cause higher prices, or did the higher prices come first, or is this just a coincidence? And then there’s the macro/micro problem. Tuition sticker price hasn’t grown uniformly across public, private and community colleges, muddying the analysis. Sticker price is also a rough measure to use, as so many students use a complex mixture of aid to pay for school that sticker price can be almost meaningless.

Check out MONEY’s Best College Values rankings

Finally, the parallel between housing and college markets is inexact. Slots at colleges aren’t limited in supply the same way that houses are. So we’re not really talking about more dollars chasing “fewer” goods.

Still, that doesn’t mean the laws of economics are suspended, and the more money made available to college consumers, the easier it is for colleges to raise prices. And through a number-crunching formula designed to tease out these effects, the Fed comes up with this depressing conclusion: Pell Grants and subsidized loans create a passthrough effect of about 55-65 cents on the dollar. That means for every additional $100 the federal government gives or loans a student, colleges raise tuition $55-$65.

Tax dollars flowing right to colleges, funneled through (mostly) borrowing students.

“From a welfare perspective, these estimates suggest that, while one would expect a student aid expansion to benefit its recipients, the subsidized loan expansion could have been to their detriment, on net, because of the sizable and offsetting tuition effect,” the authors conclude.

The idea that aid helps colleges more than students is not new. Back in the 1980s, then-Education Secretary Bill Bennett warned about the problem, saying, “increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase.” His statement is now known as the Bennett Hypothesis, which this paper seems to confirm.

But there are a lot of caveats in the findings. Plenty of other factors put price pressure on colleges during the time span studied. Here’s just one: When the housing bubble burst, newly unemployed workers flocked to colleges, particularly community colleges. That created “fewer goods,” and likely contributed to higher prices.

The authors tried to deal with these issues, but of course any such study will be inexact – and it’s important to note the paper does not represent the views of Federal Reserve, just the paper’s authors. The bulk of the paper explains how the authors tried to isolate the effects of tuition increases. They did so essentially by identifying which schools gained the most from increases in aid eligibility during the time studied, and looking for corresponding tuition changes at those schools. For example, the maximum subsidized federal loan amount for freshmen rose in the 2007-08 academic year from $2,625 to $3,500, which benefitted students at some schools more than others.

That led to a bit of fine-tuning in the results. Passthrough of unsubsidized students loans was only 30%, the study found. And the biggest benefactors from the passthrough effect were pricey private colleges with average academic reputations.

“We find that the passthrough of subsidized loan aid to tuition is highest among relatively expensive, mostly private, four-year institutions with relatively high-income students but with average selectivity, as measured by their admittance rates,” the authors say.

The paper makes no recommendation on what to do about this effect. Less aid wouldn’t translate into lower prices, at least not right away (prices fall much more slowly than they rise), and that would be a terrible burden to impost on today’s students. The real sad news is that increases in student aid might not help either, as colleges seem to “correct” for the greater dollars available to them very efficiently.

When student loans come due, they have a major impact on the credit scores of millions of Americans — some seeing their scores rise from consistent on-time payments, and others experiencing a major credit score dive if they can’t pay or won’t pay.

Read next: The 50 Most Affordable Private Colleges

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MONEY Student Loans

What Could Happen if You’re Caught Lying on the FAFSA

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Troels Graugaard—Getty Images

A third of all FAFSA applications are selected for verification by the Department of Education.

College is expensive, and it’s especially shocking to some parents and students when they start the financing process to learn that one form — the FAFSA — may largely determine their financial fate when it comes to federal student aid. It may be tempting to fudge the numbers on the FAFSA to get more money to help pay for your child’s education, but getting caught could spell big trouble. Unfortunately, federal student loan fraud is a growing trend:

  • One commenter in the College Confidential forums said her parents were planning to claim to be separated in order to try to maximize their chances of financial aid: “I was definitely NOT on board with this but they refuse to listen to anything I’m saying,” the student wrote.
  • In 2014, the Boston Globe reported that a father of a former Harvard student pleaded guilty to charges of falsifying income information to get more than $160,000 in financial aid. (He apparently filed false tax returns, which likely carries additional penalties.)
  • A college professor and counselor was charged with fraud after he allegedly falsified applications for students he said he was just trying to help.
  • A mother and daughter pleaded guilty in 2014 to making false statements to federal agents in connection with an investigation of student aid fraud. The mother reported no income for a time period during which she reportedly received over $521,000 in income.

If you’re thinking of falsifying your FAFSA, just don’t. Under the Higher Education Act of 1965, penalties include a fine of up to $20,000 and/or up to five years in prison. Plus, you’d have to return any aid you had received.

And don’t think you can’t get caught. “College financial aid administrators are more skilled and experienced at detecting lies than families are at perpetrating them,” warns Mark Kantrowitz senior vice president and publisher of Edvisors.com which publishes a variety of FAFSA tip sheets.

What about the commenter whose parents want to pretend to be separated? It’s not an uncommon scenario says Kantrowitz, but “if it’s a informal separation, it’s only acceptable if the parents don’t live together,” he says. “They may ask for evidence that the parents don’t live at the same address.” And there are ways to find out they aren’t telling the truth. The college could “call the home of the custodial parent and ask for the other parent. If that parent picks up the phone then it’s very likely they live together,” he says, by way of example.

A more common scenario, he says, is when parents are separated or divorced and lie about which parent has custody in order to maximize the chances of getting aid. But there are ways of finding that out, too. For example, the school can match up the custodial parent’s address with the address of the high school from which the student graduated. If they don’t match? It may be fraud.

“You would be surprised how often the student blabs,” says Kantrowitz. “When a school has credible information about fraud, they are required to investigate it.”

A college education is expensive and parents and students who want to avoid student loan debt may be tempted to fudge facts. But it’s not worth it. Here’s a guide to paying for college without a mountain of debt — and without lying on your financial aid applications.

If federal student loans aren’t enough to cover your total student loan bill, you have other options. Private student loans are available for students and parents, but private loans (unlike federal student loans) will most likely require a credit check to determine your interest rate, and a co-signer if the borrower has a limited or non-existent credit history. If you have great credit, private student loans may even get you a better interest rate than Parent PLUS loans, so doing your research, improving your credit and monitoring your progress are key.

Read next: The 50 Most Affordable Private Colleges

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MONEY Student Loans

Win the Lottery, Get Your Student Loan Paid Off

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Oliver Cleve—Getty Images

New Jersey Assemblyman John Burzichelli has proposed a new kind of lottery in which the winners would get their student loan debt erased.

Student loan debt has been one of the hotter political topics of the past few years, generating a collection of proposed solutions like free community college, a student borrower’s bill of rights and changes to the bankruptcy law, to name a few. A state lawmaker in New Jersey just tossed out another idea: a debt-payoff lottery.

Of course, anyone with student loan debt could enter their state’s lottery (though not all states have them) for the chance to win and pay off their loans that way, but Assemblyman John Burzichelli proposed a smaller, targeted lottery for people with education debt, reports NJ.com.

His bill describes a lottery in which borrowers can register information about their debt to play, and they can buy tickets online, according to the news report. Someone else can also buy a lottery ticket (no more than $3) to benefit a borrower. Borrowers could not spend more than 15% of their loan balances on the lottery tickets — the typical borrower who graduated from a New Jersey school in 2014 had $28,109 in loans, according to the Project on Student Debt, and 15% of that is $4,216. Like any other lottery winners, borrowers would be subject to taxes on their prize. If a borrower wins a pot that exceeds his or her debt, the remaining prize money would go to other borrowers.

While the number of people who could enter a student-loan-payoff lottery is smaller than the potential number of ticket holders in a general lottery, the odds of winning likely wouldn’t be great. Imagine getting to the point where you’ve maxed out your allotment of ticket purchases and realizing you spent thousands of dollars for a chance at paying off your debt, when you could have just paid off thousands of dollars in debt. That would be depressing. Then again, that’s how these things work. With every purchase, there’s always the argument that the money could have been better spent.

Meanwhile, as this bill lingers in the New Jersey Legislature, millions of borrowers across the nation have student loans to pay. Maybe a few of them will win lottery jackpots and use them to pay off their debts, but most people need to figure out a way to afford these things with the financial resources they’ve got. Failing to pay your student loan bills will certainly destroy your credit, and you may have your wages garnished or tax refunds seized, if you default on federal loans. If you’re concerned about your ability to repay your student loans, talk to your servicer (the company that handles your loan payments) and look into any student loan repayment options that could make your debt manageable.

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MONEY Student Loans

Get Your Student Loan Forgiven With These Jobs

Americorps Teachers Help DC School Students
The Washington Post—The Washington Post/Getty Images Americorps reading tutor Kelly Meany gives one-on-one reading instructions to 7-year-old 2nd grader Madissen Moody at C.W. Harris Elementary School on Friday, September 19, 2014, in Washington, DC. Working for AmeriCorps is one way to get student loan forgiveness.

Public interest careers can slash your student loan obligations.

After seven years as a social worker, Megan Kent knew she wanted to make the switch to public interest law. But she also knew it wouldn’t be cheap.

“There’s a lot in the media right now, and there has been for a few years now, about how expensive law school is and what it means to take on that level of debt,” says Kent, 34.

That’s where the Public Service Loan Forgiveness Program comes in. Created as part of the College Cost Reduction and Access Act of 2007, the program makes your remaining loan balance disappear if you’ve made 120 payments on your student loan while working in a qualifying public interest job.

Kent graduated from Lewis & Clark Law School in Portland, Oregon, last spring. “The 2007 loan forgiveness program was a huge factor in that decision,” she says of her choice to enroll.

She’s now an Equal Justice Works AmeriCorps Legal Fellow at OneJustice in Los Angeles, and she also has about $160,000 in student loan debt. But the one-two punch of income-based repayment and Public Service Loan Forgiveness (PSLF) is reducing her current payments and will eventually allow the remainder of the debt to be forgiven. Here’s how you too can make the most of these programs so your desire to help others helps you.

Careers that qualify you for loan forgiveness

After you graduate from college or grad school, you’re eligible for PSLF if you take a full-time job at a federal, state or local government agency; at a 501(c)3 tax-exempt nonprofit; in the military; or in an AmeriCorps or Peace Corps position. Workers who qualify include military personnel, teachers, social workers, emergency medical technicians, police officers, firefighters, librarians and nurses. A campaign by the National Young Farmers Coalition is also underway to add farming to the list of PSLF-eligible jobs.

The key to PSLF is that it doesn’t matter what you do at a nonprofit or in government, as long as you work for an entity focused on public service. So you can be an administrative assistant at a public school, not necessarily a teacher, and still qualify. You can also work for a private organization that’s not a 501(c)3 as long as your job falls into the buckets of public safety, public health, public education or library services. Jobs at religious or political organizations or labor unions aren’t eligible.

Check in with the human resources representative at your job, or have him or her read through the Consumer Financial Protection Bureau’s tool kit for employers, to see whether you can certify as a public service employee.

How it works

Beyond choosing a career in public service, you’ll have to jump through a few additional hoops before you’re mercifully debt-free.

Make sure the loans you took out fit the criteria. Only federal loans, not those you received from a private bank or financial firm, qualify for PSLF. They must be in the form of a federal Direct Subsidized Loan (which the government pays the interest on while you’re in school) or a Direct Unsubsidized Loan (you pay the interest while in school and during your grace period).

You can repackage other types of federal loans, including Perkins and Federal Family Education (or Stafford) loans, into a Direct Consolidation Loan so they can be forgiven under PSLF. Consolidation is free and will not only make you forgiveness-ready, but it will also bundle your loans into a single, less-complicated monthly payment.

Enroll in a qualifying repayment plan. You have a lot of options for how much you pay per month on your federal loans and for how long. But only some of those options make sense for PSLF. For instance, you can choose the 10-Year Standard Repayment Plan, which breaks your total loan balance into 120 separate payments. But by definition you won’t have any loans to pay off once PSLF kicks in after 120 payments. So it’s a better idea to sign up for an income-driven repayment plan.

Income-based repayment lets you set aside 10% to 15% of your disposable income, instead of a flat amount, to pay off your loans each month. On a day-to-day basis, that’s what allows Kent to live on her current salary, she says.

“If there weren’t income-based repayment plans, I wouldn’t be able to afford my monthly payments,” she says. “It would be very difficult to work in public interest even if you knew you could get those loans forgiven in 10 years.”

Apply for forgiveness after making 120 on-time monthly payments. For most borrowers, that means 10 years of loan payments at the amount you’ve signed up for. Submit to the federal government an employment certification form annually, or any time you switch public service jobs, to keep track of your employment as you pay off your loans. Keep your W-2 wage statements and pay stubs from work organized so you’re easily able to recertify each year.

You’ll officially apply for forgiveness after you’ve made your 120th payment. PSLF requires you to work in public service during both the application and forgiveness stages, so make sure to stay in a qualifying position until your loan balance has been completely dissolved. Then get ready to celebrate: After working for a good cause and being debt-free, you’ve earned it.

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MONEY

You’ll Never Guess the Latest Victims of the Student Loan Crisis

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Renold Zergat—Getty Images

A fast-growing number of seniors are hitting retirement with a student debt burden. Even their Social Security is at risk.

Most debt you can get out of—painful as it might be. Credit card debt can be cleared in bankruptcy. A mortgage can end in foreclosure. But student debt is more sticky, and it turns out it can have big consequences in retirement.

Last year, Richard Minuti’s Social Security payments were cut by 10%.

The Philadelphia native was already earning only a bit over $10,000 a year, including some part-time work as a tutor. “I was desperate,” says Minuti. “Taking 10% of a person’s pay who’s trying to live with bills, that’s the cruelty of it.”

The Treasury Department was taking the money to pay for federal student loans he had taken out years before. Just before age 50, Minuti had gone back to college to get a second bachelor’s degree and a better job in social work and counseling. But the non-profit jobs he landed afterwards were lower paying, and he defaulted on the debt.

Student debt’s painful new twist

Minuti is one of the small but expanding group of seniors who are hitting retirement with a student debt burden. Over the past decade, people over the age of 60 had the fastest growing educational loan balances of any age group, according to the Federal Reserve Bank of New York. The total amount grew by more than nine times, from $6 billion in 2004 to $58 billion in 2014.

SeniorEduLoanGrowth

Only about 4% of households headed by people age 65 to 74 carry educational debt, according to a 2014 U.S. Government Accountability Office report. But as recently as 2004, student loans balances in retirement were close to unheard of, affecting less than 1% of this group.

Educational loans are very difficult to pay off when you are in or near retirement. Unlike a new college grad, there’s little prospect of years of rising salary income to help pay off the loan. That’s one reason older debtors have the highest default rate of any age group. (Also, most people who can’t pay off a loan will eventually age into being included among older debtors.) Over half of federal loans held by people over age 75 are in default, according to the GAO.

Student loan debts can’t be discharged in bankruptcy. And, as Minuti learned, federal tax refunds and up to 15% of wages and Social Security can be garnished.

This can be devastating, says Joanna Darcus, consumer rights attorney at Community Legal Services of Philadelphia.

“Most clients find me because the collection activity that they’re facing is preventing them from paying their utilities, from buying food for themselves, from paying their rent or their mortgage,” says Darcus, who works with low-income borrowers.

The number of seniors whose Social Security checks were garnished rose by roughly six times over the past decade, from about 6,000 to 36,000 people, says the GAO. Legislation from the mid-1990s ensured recipients could still get a minimum of $750 a month. At the time, this was enough to keep them from sliding below the poverty threshold. But to meet the current threshold, Congress would need to increase this to above $1,000 a month.

In other words, with enough debt, a Social Security recipient can be pulled into poverty.

“That’s pretty stressful for seniors when they understand that,” says Jan Miller, a student loan consultant who has seen a rise in his senior clients.

What’s behind the rise?

It’s not, despite what you might guess, only about parents who are taking on loans for their kids late in their careers.

Listen: How to decide if you should take out loans for your children’s education

In the GAO data, about 18% of federal educational debt held by seniors was from Parent PLUS loans for children or grandchildren. The remaining 82% was taken out by the borrower for his or her own education. (The GAO data differs from the New York Fed’s, showing lower total balances, so it may be missing some parental borrowing.)

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Darcus says many of her clients turned to education as a solution to unemployment and long-stagnant wages. Enrollment for all full and part-time students over age 35 increased 20% from 2004 to its recessionary peak in 2010, according to the National Center for Education Statistics.

“Among many of my clients, education is viewed as a pathway out of poverty and toward financial stability, but their reality is much different from that,” Darcus says. “Sometimes it’s their debt that keeps them in poverty, or pushes them deeper into it.”

And in recent years, both tuition and older debts have been especially difficult to pay, as home values and household assets took a hit in the Great Recession. Meanwhile, of course, the cost of higher education has soared. Tuition for private nonprofit institutions is up 78% in real dollars since 2004, according to the College Board.

What may be changing

New regulations and legislation this year may bring some relief to educational loan borrowers. The Senate in March introduced legislation to make private loans, but not federally subsidized loans, dismissible through bankruptcy.

For federal loans, more favorable income-driven repayment plans may be extended to up to 5 million borrowers this year. These plans, which have been growing in popularity since launching in 2009, adjust monthly payments according to reported discretionary income. The Department of Education is scheduled to issue new regulations by the end of 2015 that may allow all student borrowers to cap payments at 10% of their monthly income.

But it is unclear what percentage of that 5 million people are older borrowers who would benefit. Some borrowers have also complained that income-driven repayment plans require too much complex paperwork to enroll and stay enrolled. Borrowers who want to find out if they are already eligible for income-driven repayment plans can go here.

Parent PLUS loans would not be included in the new regulations. However, Parent PLUS loans can still be consolidated in order to take advantage of a similar, albeit less generous option, called the Income Contingent Repayment plan. This plan allows borrowers to cap their monthly payments at 20% of their discretionary income.

Still, some feel the best way to help seniors with student loan debt is to stop threatening to garnish Social Security benefits altogether. This spring, the Senate Aging Committee called for further investigations of the effects of student debt on seniors.

“Garnishing Social Security benefits defeats the entire point of the program—that’s why we don’t allow banks or credit card companies to do it,” said Sen. Claire McCaskill of Missouri in a statement.

Getting out from under

Richard Minuti was able to enroll in an income-based repayment plan last year with the help of a legal advocacy group. Because Minuti earned less than 150% of the federal poverty level, the government set his monthly obligation at $0, eliminating his monthly payment.

“I’m appreciative of that, thank God they have something like that,” Minuti says, “because obviously there are many people like myself who are similarly situated, 60-plus, and having these problems.”

But Deanne Loonin, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, says she doesn’t see the trend of rising educational debts ending any time soon. And some seniors will struggle with this debt well into retirement.

“I’ve got clients in nursing homes who are still having their Social Security garnished and they were in their 90s,” she says.

MONEY Student Loans

How a Student Loan Bill Can Go From $97K to $236K

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Max Oppenheim—Getty Images

A tale of loan consolidation gone bad.

There’s been a lot of discussion lately about Americans deciding to not pay back their student loans. While the reasons for purposely defaulting on education debt vary, the consequences are invariably unpleasant: debt collection, wage garnishment, growing loan balances, even lawsuits.

For example: A Connecticut attorney’s student loan debt from law school has more than doubled since he stopped making payments in 2001, and a federal judge has ordered him to repay the higher amount, reports the Connecticut Law Tribune. According to the article and court papers, the lawyer owed $97,658.55 when he consolidated his loans in August 1999, which he intended to tackle through income-contingent repayment. However, he and the government disagreed on what the adjusted payment amount should be. More than a decade later, his balance has ballooned to $236,535, which a U.S. District Court judge recently ordered the lawyer to repay.

That’s just one story of how student loan debt can grow rapidly, but it’s not the only one. Education debt can quickly make a mess of any borrower’s finances. Student loans are rarely discharged in bankruptcy, meaning if you get into financial trouble and can’t make the payments, there’s not much you can do but try to catch up on the debt later. Forbearance and deferment can temporarily alleviate the pressure, but interest continues to accrue on the balance, potentially leaving you with more debt than you had in the first place. Once a borrower defaults on student loans, the lender may pursue the individual through debt collection or a lawsuit. Any income the borrower has may be subject to debt collection, and those who default on federal loans may lose out on future tax refunds and access to government programs like FHA loans.

On top of all that, if you fall behind on student loan payments, you’ll see your credit score suffer, potentially making it difficult for you to get a home or apartment, access affordable pricing on loan and credit products or set up services like utilities or a cellphone plan without having to pay a hefty deposit upfront. In some states, your credit history has an impact on how much you pay in car insurance premiums, too.

There are many reasons to make repaying your student loans a priority, and there are a few ways you can try to make your federal student loan payments more manageable. Before deciding not to pay, it’s important to research your repayment options and consider the long-term financial consequences of student loan default.

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