The heavy weight of student loan debt on older Americans

Worried senior couple checking the bills at home
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Though student loan balances have been increasing among all age groups, the growth has been greatest among those closing in on retirement, according to research from AARP.

In 2020, borrowers 50 and older owed $336.1 billion on student loans — 22% of the nation's total student loan debt. That was more than double the 10% share held by that age group in 2004, AARP says.

In the years immediately leading up to retirement, Americans should be putting money aside and investing it for the next chapter in their lives. But older borrowers with student debt save less than their counterparts without it.

"To the extent that their budget is squeezed by the need to make student loan repayments, it’s no doubt cutting into their ability to save for other purposes," says AARP's Lori Trawinski, lead author of the study.

Student loan borrowers ages 50 to 59 had a lower median amount in their retirement accounts than consumers without student loan debt, a 2017 report from the Consumer Financial Protection Bureau found.

Americans in their 50s and 60s struggling to save for retirement and pay off student loans can turn to certified financial planner professionals for help. Financial planning services today can be surprisingly affordable and are even available online.

Student loan defaults are costly for pre-retirees

Paper check from the United States Treasury
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Student loan defaults have become a growing concern among members of the older generation.

According to AARP data from 2015, nearly 3 in 10 (29%) borrowers between ages 50 and 64 were in default, meaning their payments were at least nine months past due.

And, among the 870,000 people over age 65 who had student loan debt that year, 37% were in default. When retirees are in default on federal student loans, the government can take up to 15% of their monthly Social Security benefits.

Earlier this year, Massachusetts Sen. Elizabeth Warren and Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren cited the rising number of seniors with student debt in an op-ed piece for CNBC.

“Older Americans shouldn’t have to limit daily meals so that they make a monthly payment,” they wrote. “And they definitely shouldn’t have their hard-earned Social Security stripped from them.”

President Biden has said he's willing to cancel $10,000 per borrower in student loan debt, but he hasn’t committed to the $50,000 in forgiveness that Schumer, Warren and others have been pushing for.

Options to improve your financial situation now

Worried older woman in glasses with red hair.
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If you’re among those struggling with growing debt and can't afford to wait until the Biden administration takes action, consider other ways to bolster your finances.

You could refinance your student loan debt into a new loan at one of today's record-low interest rates. Moving your debt into a cheaper loan could help you save on monthly payments and pay off your balance faster.

Note that if you have a federal student loan, refinancing would involve switching to a loan from a private lender. That would also disqualify you from federal loan forgiveness, should it happen.

If you own a home, you could refinance your mortgage with a cash-out option that would allow you to borrow against your home equity to pay off the debt. Rolling your student loan debt into your mortgage could help free up cash flow to pay other bills.

Or, to create room in your budget, you could simply do a traditional mortgage refi — and score savings. Mortgage rates are still historically low, and refinancing could cut your monthly payment by hundreds of dollars if you shop around for a good rate.

Finally, explore ways to increase the money you’re bringing in. If you’ve been reluctant to dabble in the record-shattering stock market, try a lower-stakes approach. Use an app that helps you earn returns in the market merely by investing your "spare change."

About the Author

Nancy Sarnoff

Nancy Sarnoff

Senior Reporter/Editor

Nancy Sarnoff is a senior reporter and editor at MoneyWise. Previously, she covered commercial and residential real estate for the Houston Chronicle where she also hosted Looped In, a podcast about the region’s growth, development and economy. Her work has been recognized by the National Association of Real Estate Editors and the Society of American Business Editors and Writers.

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