The problem of student loan debt is not exclusive to young professionals a few years removed from receiving a diploma. It now also affects senior citizens, who carry their college debts even after they retire.
The number of Americans aged 65 and older who still owe college debt is increasing, and they collectively carry a burden that amounts $18.2 million in unpaid debt. This means that not only do older Americans have lower net worth and income, they also have less security in terms of funding their exit from the workforce.
"As the baby boomers continue to move into retirement, the number of older Americans with defaulted loans will only continue to increase. This creates the potential for an unpleasant surprise for some, as their benefits are offset and they face the possibility of a less secure retirement," a report from the Government Accountability Office notes.
Testimony was offered Sept. 10 to the Special Committe on Aging of the U.S. Senate by Charles A. Jeszeck, director of Education, Workforce, and Income Security, but the GAO made no recommendations. Debt in this category grew sixfold, the report notes.
According to the GAO report, the number of of households that are headed by a person aged 65 to 74 with college debt increased from 1 percent in 2004 to 4 percent in 2010. The figure only represents a small minority of households with student loan debt. However, the amount of money owed in this group is much higher than previous levels. The college debt of people aged 65 to 74 grew from $2.8 billion in 2005 to $18.2 billion in 2013.
"Older Americans -- that is, Americans in or approaching retirement -- may hold student loans for a number of reasons. For example, because such loans may have a 10- to 25-year repayment horizon, older Americans may still be paying off student loan debt that they accrued when they were much younger. They may also have accrued student loan debt in the course of mid- or late-career re-training and education. In addition, they may be holding loans taken out for the education of their children, either through co-signing or through Parent PLUS loans," the GAO report read.
Student loan debt is especially hard to deal with because it cannot be discharged during bankruptcy, unlike other types of debt. According to the GAO study, unpaid college fees may cut the income of retirees below the proverty threshold. Federal student loans can remain unpaid for a year. However, once the grace period is finished, the Department of Education can act aggressively to reclaim the funds. The common tactics include taking a cut of the person's Social Security disability and retirement benefits. From 2002 to 2013, the number of people aged 65 and older who had their benefits reduced rose from 6,000 to 36,000.
"Although few older Americans have student debt, a majority of households headed by those 65 and older reported having some kind of debt, most commonly home mortgage debt, followed by credit card and vehicle debt," the report notes.
"Aggregate federal student loan debt levels have more than doubled overall, rising from slightly more than $400 billion in 2005 to more than $1 trillion dollars in 2013. The total outstanding student debt for those 65 and older was and remains a small fraction of total outstanding federal student debt. However, debt for this age group grew at a much faster pace -- from about $2.8 billion in 2005 to about $18.2 billion in 2013, more than a sixfold increase."
What may be even more surprising is only 27 percent of this debt owed by American's ages 50 to 64 is for their children's schooling, "while about 73 percent was for the borrower's own education. For age groups 65 and over, the percentages of outstanding loan balances attributable to the borrowers' own education are even higher. For those aged 65 to 74, 82 percent of the outstanding student loan balances was for the individual's own education, and for the 75 and older group, this was true of 83 percent."
In preparing the report, the GAO got information from the Federal Reserve Board's Survey of Consumer Finances, the Department of the Treasury, the Social Security Administration, and the Department of Education. It also reviewed documents and interviewed staff, and got technical comments on a draft of its testimony from the Department of Education, the Department of the Treasury, and the Federal Reserve System.