Over 44 million borrowers owe more than $1.5 billion in student loans, and two and a half million of these owe over $100,000. Many are struggling to pay these loans. The student loan delinquency rate (90+ days) is over 11%.1
This is news to few. The ballooning student debt problem is making national headlines everywhere. But hidden within these statistics there is a growing trend which is cause for even more worry: The fastest growing group of borrowers is seniors. Student loan debt among people in their 60s has increased 72% over the last five years, and, in total, this age group now owes over $85 billion in student debt.2
In fact, borrowers at age 30 and age 60 tend to have very similar student loan balances: the average 30 year old borrower owes $36,406, and the average 60-year-old borrower owes $35,637.3
So why are so many older adults carrying student loans? There are several major forces behind this. First, in an increasingly volatile and unpredictable job market, more and more people are returning to school in midlife to learn new skills. Many of these career-changers take out loans. Moreover, many parents co-sign on a private student loan for their children, or they take out parent PLUS loans. In fact, parents borrowing for their children through parent PLUS loans has increased by 38% since 2015.3
Carrying such massive debt in later life can seriously undermine prospects of having a financially secure retirement. For seniors who fall behind, the government will garnish their social security at a rate of 15% to pay off student loans in default. Over 100,000 people age 50+ have some of their Social Security benefits seized to repay overdue federal student loans each year.4
For older adults struggling with student debt, there are a few potential strategies to consider. Income-driven repayment plans like Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), Income Contingent Repayment (ICR), and Income Based Repayment (IBR) can help reduce monthly payments, but also extend the time you have to pay them. These programs let borrowers pay a percentage of their discretionary income.5 Another option is private refinancing. Older adults, who are more likely to have excellent credit ratings, can refinance their student loans with a private company, often at a lower rate, though private lenders may offer fewer benefits.
Finally, if you are carrying debt from your children’s education while you are in or nearing retirement, planning as a family to repay the balance can be a better strategy than trying to manage it on your own. Today, four out of five retirees are still supporting their adult children, which can deplete their own financial resources when they need it most. Retirees who are paying out to support family members may find themselves needing to turn to their children for financial assistance down the road. Addressing family financial challenges upfront can help everyone achieve a better and more financially secure future.
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Preparing for education expenses
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Balancing family needs with retirement preparation
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1. Federal Reserve Bank of New York
2. Business Insider, Americans in their 60s have nearly as much student loan debt as people in their 30s, September 2019
3. Experian, September 2019
4. Forbes, The Growing Trend Of Retiree Student Loan Debt, May 2019
This publication is designed to provide general information and is for discussion purposes only. The effectiveness of any strategy is dependent upon each individual’s facts and circumstances. This article does not provide legal, tax or account advice. Because of the possibility of human or mechanical error, the accuracy, adequacy, completeness or availability of any information is not guaranteed.