Managing Debt

3 Ways Student Loan Debt Can Wreck Your Retirement

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3 Ways Student Loan Debt Can Wreck Your RetirementIt’s tough enough to deal with student loan debt you can’t pay when you’re a 20-something, but imagine dealing with it when you’re in your 60s or 70s. “This population often gets ignored because people hear the words ‘student loans’ and they think 20-year-olds,” says Persis Yu, a staff attorney with the National Consumer Law Center.

It’s a big — and growing  — problem. Americans age 60 and older owe roughly $43 billion in student loan debt and more than 10% are 90 days or more delinquent.

[Related Article: The First Thing You Must Do Before Paying Off Debt]

There are some unique challenges that older Americans, many of whom are partially or fully retired, face.

1. The upside is limited.  A higher education is often seen as a way to improve job prospects and increase earnings, either in one’s current career or in a new one. Indeed, the Pew Research Center reports that the typical college graduate earns an estimated $650,000 more than the typical high school graduate over the course of a 40-year career.

But for retirees with student loan debt, the picture is much different.

“There are four potential sources of education debt for retirees,” observes Mark Kantrowitz, publisher of

  • Undergraduate/graduate student loan debt from decades past
  • More recent undergraduate student loan debt
  • More recent graduate student loan debt
  • Education loan debt borrowed (or cosigned) on behalf of a child or grandchild

He believes it’s this last group that is driving a lot of the increase in debt for older Americans.

“It seems unlikely that much of this debt would have come from undergraduate student loans from decades in the past, since fewer students borrowed 30+ years ago and the average debt at graduation was much lower,” Kantrowitz says. Crunching available data, he concludes that “most of the retirees with education debt borrowed or cosigned that debt to help their children or grandchildren pay for college. Much fewer borrowed to pay for their own education.”

Some borrowers may have gone back to school at an older age to get a degree with the hopes of earning more. Indeed, during the recent recession some schools were reporting a significant increase in enrollment by students age 50 or older. But even if these grads come out of retirement to work, they have less time to reap the rewards of a degree. As the Pew report points out: “a dollar earned at the start of someone’s working life is more valuable than a dollar earned toward the end of that person’s working life.”

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2. There are fewer options for digging out. Student loans are extremely difficult to discharge in bankruptcy and there is no limit on how long federal loans can be collected. As a result, borrowers may feel like they are in a virtual debtor’s prison. This may be especially true of those in the later years of life who see no way to pay those debts off in their lifetimes.

One of the best programs for handling unmanageable student loan debt, for example, is the Income-based Repayment program (IBR), which allows students with federal loans to apply for payments that are based on their incomes. Any remaining balances will be forgiven after 10 years for those who work in public service jobs, or after 20-25 years for all others.

But IBR is not retroactive. Forgiveness occurs only after the required number of payments are made while enrolled in the program. And it is not available for Parent PLUS loans or for private student loans, though there are efforts to change that.

Yu, the attorney with the NCLC, points out that PLUS loans may be eligible for the Income-Contingent program, which is fairly similar to IBR, if they have been consolidated into a Direct Consolidation Loan on or after July 1, 2006.

Loans co-signed for a child or grandchild will always be private student loans, Yu points out, “and they are another animal.” Unlike federal student loans there are statutes of limitations on private student loan debt, so if that time period runs out before the lender gets a judgment, the borrower should be able to raise the statute of limitations as a defense if they are sued. Still, that doesn’t make the debt go away.

3. Your retirement income may be at risk. While Social Security is out of reach of most creditors, when it comes to federal student loans, Social Security income may be at risk. An increasing number of retirees are finding that part of their Social Security income is being taken to offset their student loan debt. “According to the Department of Treasury’s Financial Management Service data, in 2000 only six people had their Social Security checks garnished for delinquent student loan debt. (In 2012) from January to August, 115,000 have had their checks garnished. That’s about double from last year,” wrote Steve Rhode on his blog

[Related Link: How much of my Social Security can be garnished for student loan debt?]

Even those with what would seem to be ample retirement savings may find themselves dipping into those funds — or taking on debt — to help their children or grandchildren with college loan payments. “Education debt is actually a problem within a problem for retirees who constitute one of the fastest (if not the fastest) growing debt-encumbered demographics today,” says Mitchell Weiss, a financial services executive and author of Life Happens: A Practical Guide to Personal Finance from College to Career-2nd Edition, “in large measure because fixed income investment returns have been absolutely pummeled over past several years.”

He provides this example: “Consider a couple that managed to accumulate $1 million during the course of their individual working lives. A few years ago, that $1 million would have probably returned $50,000 or $70,000 in interest and dividends each and every year. Today, however, that same $1 million may only be returning $20,000 or $30,000, leaving them with a $30,000 to $40,000 shortfall. Has their cost of living declined by a commensurate amount? I don’t think so…”

Are you over 60 and paying student loan debt? Share your story in the comments below.

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  • Sai MacCormack

    I have a parent plus loan for my daughter from the Department of Education. I am 62 years old and very concern about retiring with that debt. Any advice will be appreciated.


  • Melissa Tulin

    I took out a Parent Plus Loan for my daughter. Then I foolishly went back to graduate school to get my MSW at age 55. I dropped out after a year when I realized by the time I graduated I would be 70,000 in debt. Now I am “only” $56,000 in debt. I will receive my pension from my government job when I am in sixty. I plan to retire from this job, get another one, and pay off the loans with my retirement money. That way iI SHOULD go into retirement at age 65 DEBT FREE. Parents, think twice before you go cosign loans and remember that degree you go to get in your fifties might not be worth it! Foolish me!

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  • ITGeek

    Here is what you do if you have the time. Keep taking 6 units of online classes in your field if possible- I am in in IT so those are the classes I take to benefit me. Then wait until you retire and go on a fixed income. Enroll in the Income Based Repayment plan and let them take their 10 – 15% of your Social Security (much less) instead of 10 – 15% of what your making during your peak earning years. If you have private loans you have not choice but to pay those back now. Of course you will probably die before they are paid off but oh well . . . ! LOL

    • anon

      make sure you don’t live in a state that transfers all debt to a surviving spouse!!!

  • math teacher

    I lost my job at age 50 and went back to school to be a math teacher. I worked for 5 years at an inner city school, which I enjoyed very much, but then got laid off when the school closed. I was expecting, per the loan forgiveness rules for inner city math and science teachers, to have a large portion of my student loan forgiven. But, unlucky me, the school i worked at failed to fill out the appropriate application for a Title 1 school and therefore I did not qualify for the loan forgiveness program. I filled out all the paperwork, only to find out that my school was not “on the list”. Fortunately my monthly payment is pretty small and will be paid off in about 10 years. I am now 62 and semi-retired.

  • Credit Experts

    Social Security was set up to help partially offset the loss of income when a worker retires, becomes disabled or dies. While we are neither lawyers are accountants, we know of no way that a person can access Social Security early to repay debt.

  • Rosie from the D

    I’m 63 with $60000 in student loans…I’ve been paying forever on these loans, but it all goes to interest.I lost my job in the 2002 (at age 51), couldn’t find work, panicked and I went back to graduate school for several yrs (including housing)…Now I want to retire in a couple years and I don’t know how in the world I can get rid of some of this debt. its a horrible feeling…

  • Gerri Detweiler

    I am not sure you are getting good advice. Have you read this article? My Social Security Income Is Being Zapped for Student Loans!

  • Anne-Marie Sholtes

    I decided to get a college degree at 45 after raising two kids, in the hopes I would be able to help ease the financial burden of my husband in our later years. When I graduated in 2009 and the job market tanked I found out that no one wanted to hire someone in their late forties in any position in my field, not even a ground level one. I am now 53 with a worthless bachelors degree in Visual Communication working as an event coordinator in a public building which pays little more than minimum wage. I currently have $100,000 in student loan debt, no 401k, and no chance of paying it back until I am dead and buried. My only consolation is that I only have $6,000 of that cosigned with my husband. I don’t know where to turn, we live in one of the most expensive parts of the country (born and raised here), daily life is a struggle “in this economy” and I am feeling hopeless. You can add in the things you can’t escape from are death, taxes and student loans. Please help those of us who were trying to do the right thing.

    • Gerri Detweiler

      I feel for you. I can’t imagine how frustrating that’s been for you. Have you looked into income-based or income-sensitive payments? Please read: Pssst…Want to Know The Best Kept Secret In Student Loans?

      They are not a panacea but they may offer some relief in terms of cash flow. And do let your legislators in Congress know what you’re going through, along with the CFPB which is asking citizens to share their student loan stress stories.

  • Cynthia Gayman

    I am 61 years old, and am paying Income Contingent Consolidated loans, but my monthly payment will never touch the principle on my loan AND my monthly payment is nearly $1,000 a month. I can’t do this. I have requested financial hardship deferments but have been turned down.

    • Gerri Detweiler

      Cynthia – We feel for you. Student loan debt can sometimes be impossible to escape. You may want to consult with a credit counseling agency with experience in student loan counseling. There are a handful of agencies that do that type of work and the cost is very reasonable. Consolidated Credit Counseling, Greenpath and Money Management International are a few that come to mind.

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