New Survey Shows Continued Challenges for Older Americans with Student Loan Debt
By Aaron Smith and Maximilian Goetz
The Georgetown University Center for Retirement Initiatives (CRI) has previously written about the startling rise of student debt among older Americans. A new borrower survey from the student loan technology startup Savi and the Student Debt Crisis Center (SDCC), a student debt advocacy nonprofit, presents an in-depth look at how student debt affects the overall financial health of older adults. The survey, conducted in October 2022, included responses from 6,802 student loan borrowers age 56+ and 4,209 borrowers age 18 to 35, and covered a range of topics related to the impact of student debt on those populations. The results were striking — particularly when compared to younger borrowers. Here are the key findings.
Older Americans had more outstanding student loan debt than younger borrowers. We compared the amount of debt that borrowers over 56 years old (referred to as “older Americans or borrowers”) owed with that of 18- to 35-year-olds (referred to as “younger Americans or borrowers”). It might be expected that older borrowers have less debt since they have had more years to pay it off, but the results revealed quite the opposite. For example, 27% of 18- to 35-year-olds owed more than $100,000 in student loan debt, compared to 33% of those ages 56+. On the other end, 55% of 18- to 35-year-olds owed less than $50,000 in student loan debt, 12% higher than that of those age 56+ (43%). This underscores the importance of providing older Americans with the resources and support they need to pay off student debt.
- A greater percentage of older Americans’ student debt came from accrued interest. While few younger Americans (<2%) had interest make up 75%–100% of their debt, nearly 10% of older Americans had that large a percentage of interest. In contrast, 47% of younger Americans had interest make up only 0–25% of their debt, compared to 25% of older Americans. Since older Americans have more outstanding student loan debt than younger borrowers and interest has had more time to accrue, this result, although troubling, is not surprising.
- Older borrowers rely on official student loan outlets for information about student loans. When asked who they trust for information on student loans, 36% of borrowers said the U.S. Department of Education, while another 24% said groups like Student Debt Crisis Center and 21% said their student loan servicers. Only 16% of borrowers relied on news organizations (both national and local outlets) for information about student loans.
- Older borrowers faced numerous negative effects during the COVID-19 pandemic because of student loan payments. Even with a pause on most federal student loans, a third of 56+ borrowers reported facing mental health problems, including stress, depression, and anxiety during the pandemic due to student loan payments. Another 20% were unable to afford basic needs, such as food or healthcare, and 10% of borrowers also missed a payment on rent, mortgage, or an auto loan. With student loan debt relief, many of these harms could have been avoided.
- COVID-19 affected the employment of older borrowers, further making it harder to manage student loan payments. Borrowers reported numerous impacts on their employment because of the COVID-19 pandemic. Notably, 9% of older borrowers said COVID-19 caused them to face early retirement, compared with 3.7% of all borrowers. The most common effects on older borrowers were reduced work hours (13% of borrowers), reduced pay (10%), and forced early retirement (9%). Other commonly reported impacts included getting laid off, furloughed, or forced into early retirement, as well as being unable to find a job and facing a negative impact on a business. If older borrowers were already facing difficulty in making student loan payments, impacts to their employment could have only worsened the situation.
- Older borrowers are reducing spending and enrolling in new payment plans to prepare for the resumption of student loan payments. Roughly ⅓ of older borrowers are reducing their spending on necessities and discretionary items, and on paying back other debts. Another ⅓ of older borrowers are enrolling in either an income-driven or auto-debit payment plan. Some other ways borrowers are preparing are by taking on another job or eliminating other bills. Only 3% of older borrowers are doing nothing. It is troubling that many older borrowers must reduce spending on necessities to pay off student loans. Older borrowers who fall behind on their student debt can face significant risk to their Social Security benefits. A recent study from the Center for Retirement Research at Boston College found that on average, delinquent borrowers are estimated to face about a $2,500 reduction in annual Social Security benefits, representing 4-6 percent of household income.
- Older borrowers spent their savings on necessities during the payment pause. While the student loan payment pause during the Covid-19 pandemic was temporarily helpful, 50% of older borrowers spent resulting savings on food, rent, or mortgage, or utilities. Others spent their savings on healthcare, vehicle payments, or paying off debts. Only 2% of older borrowers reported putting the extra money from the student loan payment pause toward savings or retirement. Simply put, we need to help older borrowers save on student loan payments, so they can afford basic essentials AND make it easier to put additional savings toward retirement.
- Most borrowers are aware of President Biden’s new debt relief plan and the resumption of loan payments. Only about 5% of older borrowers were unaware of President Biden’s new debt relief plan, now going to the Supreme Court, and the proposed resumption of federal student loan payments in January (the payment pause was extended again after the survey). The most common source — accounting for about 30% of older borrowers — of information about these topics was news articles, followed by social media, the U.S. Department of Education, and student loan servicers.
The survey demonstrates that even with the student loan payment pause, older borrowers are continuing to struggle and are likely to see greater financial pain once payments resume. Policymakers need to find ways to equip older borrowers with the education, resources, and programs they need to pay off their student loan debts so they can focus on other critical goals, including saving for retirement.
As an example of policy reforms that could help older borrowers, Congress just passed “Secure 2.0” as part of an end-of-year spending bill. Among the new provisions, employers will be able to count student loan payments toward their retirement match. For employees it’s a big win-win: they can make their typical monthly student loan payments, and now they will also be able to build retirement savings. Research from TIAA found that 27% of employees surveyed say they reduced the amount they save for retirement because of their student loans, and 12% saying they have not started saving for retirement at all due to student loans. Savi recently released a white paper on Secure Act 2.0 and the student loan retirement matching provisions with some key questions for employers to consider.
Aaron Smith is the Co-Founder of Savi and Maximilian Goetz is an intern with Savi and a current student at Georgetown University. The views expressed are those of the authors and do not represent the views of the Georgetown University Center for Retirement Initiatives.
January 2023, 23-01
Boston College, Center for Retirement Research, How Do Unpaid Student Loans Impact Social Security Benefits?, January 2023.
TIAA, 2021 Nonprofit Student Debt Survey, November 2021.
Savi, “Student Debt Cancellation & Borrower Experiences Survey Findings and Results,” December 2022.