Many older Americans still grapple with student loans, hindering retirement

Graduating with student loan debt is an all too common reality for new college degree holders beginning their careers. But there’s another, often overlooked cohort of debtors facing their own set of challenges: Americans over the age of 55 approaching their retirement years. 

About 2.2 million people over the age of 55 have outstanding student loans, according to data from the Federal Reserve Board’s 2022 Survey of Consumer Finance (SCF). These older workers and unemployed people, who at a late stage in their lives still find themselves with outstanding debt, say the loans they took out years earlier could hinder their ability to retire comfortably, according to a new report on the effects of student loan debt on retirement and financial security for older workers. 

The report comes as Americans increasingly question the value of a college degree, with a new Pew Research Center survey showing that only about 1 in 4 Americans believe a bachelor’s degree is necessary to land a good job.

Of all student loan borrowers over the age of 55, 43% are considered middle-income. Half of debtors aged 55 and over, who are still working, are in the bottom half of income earners, making under $54,600 a year, according to 2022 SCF data analyzed by researchers behind the report. 

The latter’s relatively small incomes mean they sharply feel the effects of putting a portion of their salary toward paying off student loans, making it hard for them to retire and save for retirement. 

Representation versus reality

Borrowing money for school and earning a bachelor’s degree or higher can help younger workers access job opportunities that are higher-paying and provide more upward mobility than those that don’t require a degree. 

For younger workers, student loans can even be considered “good debt” taken on to invest in an education that will lead to returns down the road.

The picture’s not as rosy for older workers though, who don’t have a long employment runway ahead of them. 

Some older student debtors didn’t even complete or obtain the degree for which they initially took out loans, putting them in a particularly precarious financial position. Not only must they make repayments on the loans, but they must do so without having benefited from what is known as the “sheepskin effect,” which is the advantages a college degree confers on job seekers. 

Nearly 5% of workers between 55 and 64, and more than 17% of workers 65 and older, have not completed the degrees for which they’d taken out loans, according to the report. These older workers are both in debt and lack enhanced earning power.

Policy interventions like debt forgiveness, making debt repayment easier, or preventing the garnishing of Social Security benefits to repay student loans, can mitigate these impacts, the report’s authors argue. 

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