Asked to picture the typical person struggling with student debt, you’d probably imagine a new-ish college graduate or working professional—maybe someone who’s trying to buy a home or who plans to start a family.
But according to recent college debt statistics , that person might just as likely be a parent or grandparent who’s trying to pay off a home or plan for retirement.
Turns out, student debt isn’t just for kids anymore. Even baby boomers, who are now in their mid-50s to early-70s are pressing pause on their dreams because they’re burdened with loans they haven’t paid off, a loan amount that has reached $16,100 for the typical Parent PLUS borrower .
Yes, millennials had their work cut out for them between high tuition rates and lower wages than they might have expected when they graduate.
But their parents and grandparents could be in it with them—sharing at least part of the financial burden. Even those who never borrowed a dime for their own education may have taken out loans or agreed to co-sign for their kids. Now they’re facing some of the same repayment problems—but with less time to bounce back financially.
Student Debt by Generation
According to the Consumer Financial Protection Bureau (CFPB), the number of consumers age 60 and older with student loan debt quadrupled between 2005 and 2015—from about 700,000 to 2.8 million. And the average amount they owe also dramatically increased—from $12,100 to $23,500.
Although most student loan borrowers are still young adults between the ages of 18 and 39, the CFPB says, older consumers are the fastest-growing age segment of the student loan market. In that same 10-year period, 2005 to 2015, the share of borrowers 60 and older increased from 2.7% to 6.4%.
When surveyed, the vast majority of older borrowers (73%) said their student debt was for a child or grandchild’s education. Twenty-seven percent said their loans were for their own education or for their spouse. And the CFPB estimates that 57% of all co-signers are age 55 and older.
Gen Xers, who are now in their late-30s and early-50s, are in a similar situation—except they often have more of their own student debt as well.
In the mid 1970s, boomers started using a combination of grants and student loans, which boosted college attendance, but cracks began to show as student loan debt skyrocketed. In 1986 , more than one quarter of student borrowers owed over $10,000; adjusting for inflation, that’s equivalent to over $21,000 today.
Now, they’re paying for their kids’ education—by taking out loans or contributing less to their retirement savings. Or both. The CFPB found that borrowers nearing retirement (ages 50 to 59) had a lower median amount in their retirement accounts than consumers without student loan debt.
Though financial advisors repeatedly warn parents not to short themselves while helping their kids, a report by the Association of Young Americans (AYA) and the AARP found student loan debt was holding up retirement savings for around a third of Gen X and boomer respondents.
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About a quarter of Gen X parents and a third of boomer parents said college debt prevented or delayed them from buying a home. And about a quarter of Gen Xers and boomers said their debt burden was an obstacle in getting the health care they need.
Some overwhelmed borrowers put at least part of the blame on federal parent PLUS loans, which they say are too easy to get. (Parents with a qualified dependent undergraduate student need only prove they don’t have an “adverse credit history”) On average, parents now borrow nearly $15,880 per year in parent PLUS loans.
In March 2018, Federal Reserve Chairman Jerome Powell said that though he generally supports the idea of a vibrant education loan climate, borrowers need to be informed of the risks they’re taking. “You do stand to see longer-term negative effects on people who can’t pay off their student loans,” he said. “It hurts their credit rating, it impacts the entire half of their economic life.”
In general, a college degree is, of course, a worthwhile investment. The unemployment rate for those age 25 and older with a bachelor’s degree or more education was 2.1% in April 2018.
For workers age 25 and older who graduated from high school but did not attend college, the unemployment rate was 4.3%. And those workers are earning more, on average. According to the Pew Research Center , those ages 25 to 39 with at least a bachelor’s degree have, on average, higher family incomes—the individual’s income plus that of his or her spouse or partner—than those in that age range lacking a bachelor’s degree.
Next Steps Toward Tackling Debt
While policymakers look for broader solutions, borrowers are finding their own. For many, that means getting their payments under control with student loan refinancing.
If you have a good job and have maintained a solid credit history, refinancing your student loans may help in a few ways.
If you can get a lower interest rate, you’ll lower the total amount you’ll pay over time—depending on the loan term you choose, of course. And it can make paying off your debt much easier if you have only one payment to make every month.
If you’re a borrower who proudly supported your child or grandchild through college but ended up with more debt than expected, refinancing may be the answer. And if you’re a new-ish borrower who can’t meet your financial goals because your student loans are eating your income, a different payment plan may help you achieve those milestones. Just keep in mind that if you refinance federal student loans with a private lender, you lose some potential federal benefits, such as income-based repayment plans and forbearance options.
Either way, you don’t have to be stuck. And you don’t have to be a college loan statistic.
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Student Loan Refinancing
If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. (You may pay more interest over the life of the loan if you refinance with an extended term.) Please note that once you refinance federal student loans, you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans, such as the SAVE Plan, or extended repayment plans.
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