Eric Merklein, 67, didn’t know he had outstanding student debt until he received his first Social Security check. He thought that his grandmother had paid it off. Unfortunately, Merklein is among the more than 2 million Americans age 60 and older carrying student debt, which is up from about 700,000 in 2005.
1. What was Mr. Merklein’s original student loan 40 years ago? What is it now? What percentage increase has his original loan seen? Would this be simple or compounded interest?
2. If the Treasury Department is deducting amounts from Social Security checks for old student loans, how can a person get these automatic deductions to stop?
3. Assume that Debbie Crotinger, 55, borrowed $10,000 on January 1, 1990, and on January 1, 2014 owed approximately 7% per year in back interest and penalties, how much would her debt be as of January 1, 2014? Based on the rate of wage garnishment listed in the article, how many years will it take Debbie to pay off her student loan?
Kitroeff, N. (2014). Student Debt Threatens the Safety Net for Elderly Americans. BusinessWeek, Aug. 21 (Retrievable online at http://www.businessweek.com/articles/2014-08-12/more-elderly-americans-are-struggling-with-student-loan-debt#r=hp-ls)