Seniors are Struggling with Student Loan Debt

Bloomberg Businessweek recently reported that a growing number of Americans aged 50 and older still have not paid off their student loans.  While people aged 50 and older hold only 17% of all student loan debt in the United States, this group has nearly three times as much debt as it did in 2005, according to recent New York Fed data.  By comparison, student debt for people under age 40 is about one and a half times as high as it was in 2005.  Interestingly though, this data does not distinguish  between older Americans who took out loans to finance their education and those who did so to put their children through college.  Either way, this group is clearly carrying more debt than ever before, and it appears that the government is using every tool it has to get its money back.  Indeed, collectors of federal student loan debt have the power to garnish income, block benefits, and withhold tax rebates.  Student debt also cannot be discharged in bankruptcy, so the debt remains until paid.  For older Americans that are already struggling with carrying debt and having no solid safety net to draw from, having their Social Security payments seized must be devastating.

According to the Federal Reserve, of the roughly $300 billion in U.S. Department of Education “Direct Loans” that are in repayment, one in six, or about 17.2 percent, are at least 31 days delinquent.  By comparison, just 3.3 percent of all loans and leases held by U.S. banks are at least 30 days late.  This latest information, which has been largely undisclosed in the past, comes as Washington policymakers and Wall Street analysts debate whether the nation’s $1.3 trillion in unpaid student debt poses a risk to U.S. economic growth and to the federal government’s budget.  Given the dismal prospects for younger Americans to repay their crushing educational debt and the fact that older Americans are also struggling, one has to wonder whether we are gearing up for another financial crisis that the government will foot the bill for.

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