It's not just Americans in their 20s, 30s and 40s who are looking for relief from student loan debt. An estimated 8.4 million people in their pre-retirement years are burdened with school debt, too — from their own time in college decades earlier or from loans taken out for children or grandchildren.
Student loan debt held by borrowers in their 50s and 60s is growing rapidly and threatening retirement security, a study says.
Some of that debt could be erased if President Joe Biden uses his executive authority to forgive as much as $50,000 in student loan debt per borrower. He’s facing mounting pressure to take action — and alarming numbers of baby boomers and older Gen Xers are among those hoping he does something soon.
The heavy weight of student loan debt on older Americans
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
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
If you’re older and struggling with student loan debt, here are some ways you might bolster your finances now — without waiting for the Biden administration to take action.
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, simply do a traditional mortgage refi and score savings. Mortgage rates are still historically low, and mortgage technology and data provider Black Knight said this week that 13 million homeowners still have the ability to refinance and cut their monthly payments by an average $283.
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 by using an app that helps you earn returns merely by investing your "spare change."