William Simpson
Graduating with student loan debt is a very common reality for new college degree holders starting their careers. But there’s another, often overlooked group of debtors who face their own set of challenges: Americans over 55 who are approaching retirement age.
About 2.2 million people over age 55 have outstanding student loans, according to data from the Federal Reserve Board’s 2022 Survey of Consumer Finance (SCF). These older, unemployed workers, who still have outstanding debts late in their lives, say loans they took out years ago could hurt their ability to retire comfortably, according to a study. new report on the effects of student loan debt on the retirement and financial security of older workers.
“Debt-burdened older workers face student loan repayment by retirement age,” according to the New School’s Schwartz Center for Economic Policy Analysis.
The Consumer Finance Survey found that older workers aged 55 to 64 expect to take an average of almost 11 years (10.96) to repay their loans, while workers aged 65 and over will need 3.5 years to pay off your student debt, on average.
The report comes as Americans increasingly question the value of a university degreewith a new Pew Research Center survey showing that only about 1 in 4 Americans believe a bachelor’s degree is necessary to get a good job.
Of all student loan borrowers over the age of 55, 43% are considered middle-income. Half of debtors age 55 and older who still work are in the bottom half of the income population, earning less than $54,600 a year, according to 2022 SCF data analyzed by the researchers responsible for the report.
The latter’s relatively small incomes mean that they feel the effects of allocating part of their salary to paying off student loans, making it difficult for them to retire and save for retirement.
Borrowing money for school and earning a bachelor’s degree or higher can help younger workers access higher-paying job opportunities and provide greater upward mobility than those who don’t require a degree.
For younger workers, student loans can even be considered “good debt” taken out to invest in an education that will pay off in the future.
The picture is not so encouraging for older workers, who do not have a long path to employment ahead of them.
Some older student borrowers have not even completed or obtained the degree for which they initially took out the loans, placing them in a particularly precarious financial situation. Not only must they repay the loans, but they must also do so without having benefited from what is known as the “sheepskin effect,” which are the advantages that a college degree confers on job seekers.
Nearly 5% of workers aged 55 to 64, and more than 17% of workers aged 65 and over, did not complete the courses for which they took out loans, according to the report. These older workers are in debt and lack greater purchasing power.
Policy interventions such as debt forgiveness, facilitating debt repayment or preventing the garnishment of Social Security benefits to pay student loans can mitigate these impacts, the report’s authors argue.
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