Student Loan Debt Is Not Just for Millenials

Older woman contemplates bills while drinking her morning coffee.

If you are like me, when you hear the term student loans, I’ll bet you normally think of Americans in their twenties and thirties. However, I recently read a study that opened my eyes a little. While most of the student loan debt held in the U.S. is owed by the people under 40, that is beginning to change significantly. Whether by financing the loans of their children and grandchildren, or by refinancing their own degrees due to a midlife career change, older Americans increasingly find themselves mired in student debt as they face retirement.

According to a report released by the Government Accountability Office in September, approximately 706,000 households headed by those 65 or older now have student debt. Compared to the 22 million households under the age of 65 with student debt, the seniors may represent a small (4%) sliver of our population, the number is 4 times that of households 65 and older that held student debt in 2009.

The reason that seniors now have student debt may surprise you. At 82%, most of the student debt for seniors was accumulated to finance their own education. Only 18% of senior student loan debt is due to financing the education of their children and grandchildren.

For seniors with outstanding student loans, the impact on their finances can be significant. Approximately 29% of those same households still have a mortgage payment and 27% still carry credit card debt. As a result, families over 65 with student loans are more than twice as likely to default on their student loans (27% VS. 12%) than those under age 65. They are more than four times as likely to default if they are older than 74 (50% VS. 12%). To compound the difficulty, student loans are nearly impossible to discharge in bankruptcy, unlike most other debts. Additionally, your Social Security payments can be garnished as a result of defaulted student loans.

Are you in your mid-thirties or older and contemplating taking on student loan debt to finance a mid-career education? You might want to take a good look at your expected student loan debt after you complete your education when compared to the salary you will earn. You will want to ensure you will be able to pay off those loans before you retire. As a rule of thumb, student loans should not exceed 8% of your net income.

Want to help your children or grandchildren pay for their college education? The same thinking needs to apply. At a time when you are facing a fixed retirement income, you don’t want to be burdened by student loan debt for your kids, when they have multiple means of paying for their education, including working part-time, scholarships, grants, and student loans of their own. Most experts will recommend that you not risk your retirement to help your children or grandchildren with their college costs.

Type of Debt 18-64 Years Old 65+ Years Old
Mortgage 50% 29%
Credit Card 43% 27%
Student Loan 24% 4%
Vehicle 34% 16%
Other Debt 31% 18%
Any Debt 81% 52%

With more than a trillion dollars in outstanding student loan debt, Americans are turning to student loans when faced with the escalating cost of their college educations. Studies show that even with student loan debt, people with a college education are more likely to prosper and are less likely to be laid off or lose their jobs over their lifetime. However, when you are contemplating student loans, look hard at your ability to pay the debt back. You don’t want to enter retirement with the burden of student loans on your back.

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