Older Americans Increasingly Impacted by Student Loan Debt

Last year, economists at the New York Federal Reserve released an analysis showing that older Americans were significantly more in debt than in previous years.  While this might not be that surprising given the aging population in the United States, a source of the debt might be less obvious: student loan debt.

The analysis compares average debt per U.S. resident by age in 2003 and in 2015.  From 2003 to 2015, debt borrowers between the ages of 50 and 80 increased their debt balance by roughly 60 percent. In this time, the average student loan balance per borrower more than doubled.

Older Americans Financially Vulnerable

Older people are more financially vulnerable and are usually on fixed incomes, so the fact that they are steadily being burdened with more student debt is troubling.  Student debt is not like other types of debt.  It is usually not dischargeable in bankruptcy.  Additionally, the Department of Education can garnish social security payments to recover defaulted student loan debt, which is something a lender cannot do.

One cause for the increase in student loan debt for older adults is that parents are borrowing for their children’s education, using programs like the Parent Plus Loans.  However, the amount of older adults’ student loan debt that can be linked to their children's’ education is smaller than you might think.  The Government Accountability Office (GAO) in a 2014 report found that 27 percent of loan balances held by people aged 50 to 64 was for their children, while the remaining 73 percent was for their own personal education.  For the next older age group, 82 percent of the loan balances was for the borrower’s own education. The GAO was unable to determine when the loans were taken out.

The GAO report also found that older Americans are more likely to have defaulted on their student loans. Twelve percent of federal loans held by 25 to 29 year old were in default, compared to 27 percent of loans held by borrowers between the ages of 65 and 74.  The GAO also found that more than half of loans held by individuals ages 75 and older were in default.

If you or an older parent are feeling burdened by your student loan debt, don’t despair!  Please contact one of our offices to sit down with an experienced attorney.  We will go over your personal financial situation in a free consultation and work with you to find the best course of action.