According to a new report from the Federal Reserve Board, more than two million Americans over age 55 still carry student loan debt. The student debt load is a persistent problem despite efforts from the Biden administration to erase as many outstanding loans as possible. The White House claims the Biden Administration has forgiven student loans for 3.9 million borrowers as of Feb. 2024.
Scope of the Issue
The newly released 2022 Survey of Consumer Finances reported that 2.2 million individuals over 55 have outstanding student loan balances. This highlights the far-reaching effects of education debt well into middle adulthood when many individuals typically start facing their prospects for retirement.
Impact on Retirement
In fact, a study by the New School’s Center for Economic Policy Analysis shows that student loans significantly impact the retirement plans of older borrowers. Not only will borrowers be forced to work longer, but the debt’s impact will also further delay their financial security.
Income Bracket Distribution
When drilling down into the data, analysts find that 43 percent of borrowers over 55 percent are in the middle-income tax brackets.
Debt Amounts for Lower Incomes
Of the older Americans with student loan debt who earn less than $54,600, these same individuals owe an average of $58,000 in student loans. This shows that lower-income individuals are disproportionally impacted by student debt.
Long Repayment Periods
According to the data reported by the Federal Reserve Board, older Americans struggle to repay student loans, even carrying the debt into retirement age.
Degree Completion Rates
Notably, many of these older borrowers still need to complete a degree program and pay off the debt without a degree to secure a more lucrative job. According to the data, more than 14 percent of student loan borrowers over 55 still needed to graduate. The costly investment in education has yet to pay off for these individuals.
Policy Recommendations
The New School’s analysis of how student loan debt impacts the retirement plans of older Americans resulted in policy recommendations from researchers. First, they recommend student loan forgiveness, followed by income-based repayment plans, which the Biden Administration has attempted to secure. Their final recommendation is uniquely tailored to the elderly student loan debt holder– protecting Social Security benefits from garnishment for student loan repayment.
Current Policy Actions
Throughout the past four years, the Biden Administration has made numerous attempts to address the stress and burden of student debt for many Americans. The typical borrower in the public eye tends to be younger Millennial or Gen Z borrowers, not a 55-year-old demographic.
Retirement Age Borrowers
Still, this latter group of individuals approaching retirement age is most likely to suffer the burden of the debt load far sooner and more tangibly than their younger counterparts.
Focus on Loan Forgiveness
The Biden Administration has set forth waves of student loan forgiveness programs, focusing on public service loan repayment, reducing or erasing interest on loans, forgiving smaller balance borrowers first, and forgiving debts for those who earn less income.
Income-Based Repayment Plans
Other programs, such as the Saving on a Valuable Education (SAVE) plan, are repayment plans based on the borrower’s income. These plans allow for payment of a more minimal balance each month, with a carrot dangling in the future of debt forgiveness after a certain number of years.
Social Security Protection
While most borrowers historically have not gotten away with not repaying student loans, there are very few protected income sources that cannot be garnished. That is why the New School’s policy recommendation is that the government protect Social Security wages from garnishment in the effort to repay student loans. This would protect essential income for retirees, the elderly, and the disabled.
Future Outlook
It is in the interest of the government to find a way for older Americans, especially lower income older Americans, to pay off their student loans so they can prepare for retirement in a state of more financial security.
