Loyalty data shows baby boomers bear the highest monthly repayment terms on student loans
When federal student loan repayments resume in February, baby boomers will shoulder the highest repayments among demographic groups, paying $620 a month on an average loan balance of $58,300. Baby boomers, many of whom are retired, are Americans in their late 50s, 60s and 60s.
The youngest student borrowers, meanwhile, Gen Z debtors in their early 20s, will pay the least at $480 a month on a balance of $27,900, according to data from Fidelity, the investment giant. based in Boston, which gleaned data from its online site. student debt tool.
The Fidelity survey is the latest evidence of the scale of the nation’s $1.7 trillion student debt, as older Americans who paid for a rewarding education or helped parents pay for school struggling with student loans. Baby boomers are paying even more than young adults who put off buying a home and other stages of life to pay off their loans.
Gen Xers, or those in their 40s to mid-50s, will pay $490 a month and millennials, those ages 25 to 40, will pay $510, according to Fidelity.
The data comes from 60,000 users of an online calculator Fidelity as of September 30. The borrowers, who usually had several debts, repaid a total of 210,000 loans and worked in 6,000 businesses or organizations. There was no information on the duration of the loans.
The US Department of Education suspended monthly student loan payments during the COVID-19 pandemic, while private student lenders continued to collect payments. Most student loans are owed to the US government.
Two of the largest student loan servicers, the Pennsylvania Higher Education Assistance Agency (FedLoan) and Navient, have chosen not to renew their federal contracts. More than 10 million borrowers are expected to be assigned new services, which some say could lead to chaos and confusion.
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“We continue to see the impact of student debt across multiple generations, and it’s a surprise to continue to see this amount [of loans] held across the population,” said Amanda Hahnel, head of student debt retirement at Fidelity Investments.
Additionally, baby boomers are borrowing from themselves — from their retirement funds — to help pay off student loans. “Older generations are also dipping into their pensions, taking out 401(k) loans to pay off student debt. It is a mark of financial hardship,” she added.
Hahnel said there were more young borrowers than older borrowers. But baby boomers have higher loan balances and pay higher interest rates on loans, the survey found. One of the main factors is that the terms of PLUS loans, which are taken out by parents, contain higher interest rates than other types of student loans.
Federal data also shows that the number of borrowers over 50 has increased in recent years, while those under 25 have declined.
NerdWallet, a San Francisco financial website, said last month that one in four American parents who borrowed from the federal government to help pay for a child’s college education do not expect to retire as planned. due to student debt.
And one in five borrowing parents regret taking the loans, the NerdWallet survey showed.
Of the total $1.7 trillion in student loan debt, older Americans borrowed about $103 billion in PLUS loans in the second quarter of 2021. There are 3.6 million Parent PLUS borrowers, and the average loan is over $28,000.
NerdWallet warned that parents who borrow for children’s college education are stealing future retirement dollars.
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Fidelity manages about $11.1 trillion in assets and helps 38 million people invest their savings, according to the company. It has 52,000 employees.
According to Fidelity, the student borrowers with the highest loan balances and the highest monthly payments are those working in the private health and social assistance sector. They pay $713 per month with a loan balance of $72,004. Retail borrowers pay $507 per month and manufacturing borrowers pay $510 per month.
Employers are also increasingly sponsoring student loan repayment matches, with about one in 10 employers offering this benefit, Fidelity found. The figure is expected to jump 300% in 2021, to one in three employers now that matches are tax-exempt, according to the Society of Human Resources Management. Among the companies for which Fidelity acts as administrator of student debt benefits are technology company Hewlett-Packard Enterprise and insurer Unum.