We once lived in a world – and it wasn’t so long ago – when retirement was looked forward to with more anticipation than dread. For many elderly Americans, the equation has shifted for the worse, in part because they find themselves still contending with student loan debt.
A new report by the Consumer Financial Protection Bureau (CFPB) lays out the grim details. The ranks of seniors (age 60+) who still have student loan debt have increased fourfold in a decade, from 700,000 in 2005 to 2.8 million in 2015. Seniors now account for 6.4 percent of all student loan borrowers, up from 2.7 percent at the start of the period. Put another way, 1.4 percent of all seniors owed student debt in 2005, whereas 4.2 percent carried that burden in 2015.
Not only have the number of seniors with student debt jumped, but so has the average amount owed, doubling from $12,100 to $23,500 during the period. The aggregate outstanding student loan debt among seniors in 2015 was $66.7 billion.
Of course, seniors have other debts to contend with as well. A 2013 survey shows 67 percent owed credit card debt, 63 percent owed mortgage debt and 45 percent were paying off auto loans. In 2014, 72 percent of individuals with student loan debt in the age group of 63 to 67, and 67 percent age 68 to 72, also had other debts.
It shouldn’t come as a surprise that a majority (73 percent) of seniors in 2014 with student loan debt were paying off student loans arising from the education of their children and/or grandchildren. The other 27 percent had student loan debt stemming from their own education or that of their spouse. Of the 870,000 student loan debtors age 65+ in 2015, 210,000 owed money to the Federal Direct PLUS Program for parents. And, as of today PLUS loans can only be transferred via private refinancing.
Another cohort of older consumers – 57 percent age 55+ and 27 percent age 62+ -- are co-signers or co-borrowers on their children’s or grandchildren’s student loans. Over 9 out of 10 private educational loans are originated with a co-signer which is often a grandparent. In the years 2005 to 2011, the percentage of student loan dollar volume arising from co-signed education loans jumped from 55 percent to 90.5 percent.
Older student loan borrowers are struggling harder to repay their loans. In 2005, 7.4 percent of seniors age 60+ with student loan debt were delinquent in their payments, and the number swelled to 12.5 percent in 2012. Furthermore, almost 40 percent of student loan debtors age 65+ are in default. Among defaulters in 2015 with federal student loan debt, 37 percent were age 65+, compared to 29 percent age 50-64 and 17 percent for those under age 50.
Social security is the sole source of regular retirement income for 69 percent of beneficiaries age 65+. Student loan debt defaulters are likely to see cuts in their Social Security payments, and the number of defaulting federal student loan borrowers age 65+ experiencing Social Security garnishments rose from 8,700 in 2005 to 40,000 in 2015. The negative effects on the older population can be profound, causing a growing proportion of those age 60+ to struggle paying for their basic needs. In addition, older student loan debtors have less saved for their retirement.
The CFPB notes that the number of complaints it receives from senior student load debtors has been on the rise. Most deal with issues regard co-signed/co-borrower loans and loans taken on behalf of children and grandchildren. The Bureau has identified age-related gaps in the programs that are meant to provide relief to hard-pressed student loan borrowers. For example, borrowers whose Social Security benefits are being garnished due to student loan defaults cannot take advantage of any of the income-driven repayment options available to younger borrowers. Clearly, policymakers have enough information on this subject to plug these gaps – the political will, or rather the lack thereof, is another story.