Student Loans in Retirement

Will your Social Security benefits be garnished to pay student loans? Apparently, that’s no unusual, according to a story in The Washington Post. The Federal Reserve, which tracks the details of household assets and liabilities, says Americans age 60 and over owe $36 billion on their student loans, and about 10% of that debt is in default. The article says that Americans into their 80s are facing debt collectors and garnished benefits. The facts are especially important because since 2008 student loans soared. The government essentially took over that business and is encouraging people to take out loans to pay for higher education expenses. What does this say about the financial future of all these new debtors?

Some of these older Americans are still grappling with their first wave of student loans, while others took on new debt when they returned to school later in life in hopes of becoming more competitive in the labor force. Many have co-signed for loans with their children or grandchildren to help them afford ballooning tuition.

The recent recession exacerbated this problem, making it harder for older Americans — or the youths they are supporting in school — to get good-paying jobs. And unlike other debts, student loans cannot be shed in bankruptcy. As a result, some older Americans have found that a college degree led not to a prosperous career but instead to a lifetime under the shadow of debt.

“A student loan can be a debt that’s kind of like a ball and chain that you can drag to the grave,” said William E. Brewer, president of the National Association of Consumer Bankruptcy Attorneys. “You can unhook it when they lay you in the coffin.”