Editor’s Note: A reference to the MIT AgeLab project has been expanded to offer more detail.
Student loan debt is growing at alarming rates for adults age 50 and older, according to a new report from AARP. Fifteen years ago, borrowers in this age group accounted for $47 billion of the nation's student loan debt. By last year, that figure had grown to $289.5 billion.
Paying for higher education is becoming an intergenerational burden, ensnaring more older adults and delaying or battering the retirement plans of many of them. The report says that in 2015 “approximately 29 percent of the 6.3 million borrowers ages 50-64 were in default,” meaning payments on a loan were at least 270 days past due. And among the 870,000 people over age 65 who had student loan debt that year, 37 percent were in default, making it possible for the federal government to take up to 15 percent out of their monthly Social Security benefits.
"Many people are carrying their own student loan debt for longer periods of time,” said Lori Trawinski, AARP's director of banking and finance and lead author of the report. “In the pre-retiree years, which we typically consider to be ages 50-64, people should be at their peak earning years and also accumulating retirement savings, hopefully at adequate rates. 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."
As part of the report, AARP surveyed more than 3,000 Americans age 40 and older about how they have financed higher education for their loved ones. The survey found that among adults 50 and older, cosigning a private loan was the most common way to help pay for someone else's education, something that 45 percent of respondents did. Among the cosigners, 25 percent said they had to make at least one payment on the loan, an expense that caught many of them by surprise.
Because college students are limited in how much they can borrow, many young adults lean on their parents for support. “Almost everybody who needs a private student loan is going to need a parent or grandparent to be a cosigner on it,” said Persis Yu, a staff attorney at the National Consumer Law Center who also directs the group's Student Loan Borrower Assistance Project.