More older Americans are finding themselves vulnerable financially because of student loan debt. A Government Accountability Office (GAO) report released this week showed that the number retired seniors aged 65-74 who still carry student loan debt has increased fourfold in the last 10 years.
In 2004, the number was about 1% of senior households, but by 2010 the number had grown to 4%. In households with heads 65 and older, 3% carry student debt, which amounts to 706,000 households according to the GAO.
Retirees saw senior student loan debt balloon from $2.8 billion in 2005 to about $18.2 billion in 2013. In total, the student loan debt in the US stands at $1.2 trillion, mostly in the form of federal loans.
“As the amount of student loan debt held by Americans age 65 and older increases, the prospect of default implies greater financial risk for those at or near retirement — especially for those dependent on Social Security,” according to the GAO.
The analysis was highlighted during a U.S. Senate hearing of the special committee on aging, “Indebted for Life: Older Americans and Student Loan Debt.”
Student loan debt cannot be dismissed in bankruptcy, so the US Department of Education (DOE) can garnish seniors’ Social Security payments and other federal benefits. This is currently happening to senior citizens.
“From 2002 through 2013, the number of individuals whose Social Security benefits were offset to pay student loan debt increased about fivefold from about 31,000 to 155,000,” the GAO states. “Among those 65 and older, the number of individuals whose benefits were offset grew from about 6,000 to about 36,000 over the same period, roughly a 500 percent increase.”
The report says that 12% of federal loans held by 25-49-year-olds were in default, and 27% held by borrowers 65 to 74 were in default. And, more than 50% of loans held by individuals 75 and older were in default. More than 80% of outstanding student debt for seniors is for loans for their own college tuition, not their kids.
The GAO report was released on Sept. 7 at the same time as the Senate Aging Committee hearing, says Julia Hawkins of Maine News Online. Sen Bill Nelson (D-Florida), chairman of the committee, said:
“Some may think of student loan debt as just a young person’s problem. Well, as it turns out, that’s increasingly not the case”.
Sen. Richard Blumenthal (D-Conn.) responded to the results shown in the report:
“What it says to me is, look at this narrow slice of the Baby Boom generation that now has debt [and] look at its impact … which is, if anything, more pernicious and insidious than it is for younger people. This age group is not only affected in more serious ways, but it is also going to grow. In other words, this report says: Look out, the cliff is ahead, or the avalanche, [or] maybe it’s a tsunami, of older student debt.”
Because inflation-adjusted wages are declining and student loan debt rising, borrowers are cutting back on spending to make loan payments, or so says a Federal Reserve survey. Approximately 50% of Americans had to cut back on spending last year so that student loan payments could be made, according to Shahien Nasiripour in The Huffington Post.
The GAO added:
“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.”