While the price for higher education continues to rise, the number of student loans issued also continues to increase. American seniors over 60 years are carrying more of that debt burden than was previously believed, which raises concerns about their ability to support their retirement years.
Both Students and Supporters
According to a report issued by the Consumer Finance Protection Bureau (CFPB), the number of 60-year+ seniors carrying education-related loans quadrupled in the past 10 years. In 2005, approximately 700,000 people over 55 years had assumed student loan debt; in 2015, that number had ballooned to 2.8 million. Additionally, the average amount owed is also markedly higher than it was in the decades before 2005, having almost doubled from $12,100 to over $23,000. Collectively, the entire population of 60-years+ debtors owes more than $66 billion dollars, just for student loan debts.
Of these debtors, only approximately 27 percent are for personal studies. The recession of the late 2000s drove many people over 50 to school when they couldn’t find work, and the loans they took out then are still on the books.
Cosigning a family member’s student loan contract accounts for the balance of the debt these generous seniors carry. Whether it is for a child or grandchild, older Americans frequently have better credit ratings than their younger family members and can use that asset to ensure a quality education for the next generation. Doing so, however, also puts them on the hook to pay that loan back if the primary signer can’t or doesn’t.
In many cases, the education bought so dearly just five years ago didn’t assure a career opportunity that paid enough to cover its cost. Many seniors have to contribute to loan repayment plans because their loved ones can’t afford to make the payments in full. Of the $66 billion in outstanding student loan debt, $44.8 billion (68 percent) is directly related to loans for children or grandchildren.
Of the generous grandparent generation, 27 percent are over 62 years, and a full 57 percent are over 55 years.
Shaky Futures in Store for Debt-Carrying Seniors
While many 50+ people may live two or more decades after their 60th birthday (American men live an average of 78.8 years, while women live to an average age of 81.2 years), almost none will work through that period. Their old-age living expenses will consume whatever financial resources they retain after they retire.
Consequently, of the senior-aged student loan debtors, the total number of delinquent accounts has risen from 7.4 percent in 2005 to 12.5 percent in 2015, and, of those debtors over 65 years, 37 percent are already in default. This last number compares to 29 percent of debtors 50 to 65 years, and only 17 percent of debtors under the age of 49.
Student Loans Add Other Burdens
Many debtors elect to eliminate services from their personal lives to pay the student loan:
- Foregoing Personal Services – Health care services are especially susceptible under these circumstances. Of those debtors over 60 years, 39 percent report skipping health care supports like medication or checkups. Only 25 percent of older Americans without student loan debt report cutting those costs.
- Reducing Savings – In 2013, in the 50-59 year age group, those with student debt had less money in their employer-based retirement accounts than those without the debt.
Debt Collection Issues Exist, Too
Finally, the CFPB report revealed that these seniors also struggle with other loan repayment concerns:
- Those on fixed incomes reported roadblocks and errors when they sought to enroll in income-driven repayment plans.
- Some co-signers saw their loan payment allocated to other debts held exclusively by the student borrower.
The CFPB will use the data to inform and structure rule changes for student loans assumed by people over 50 years.