The GAO report cited a number of reasons why older Americans might still be paying off student loans even as they’re gearing up for retirement. The majority of the college debt carried into retirement, about 80 percent, came from loans seniors took out for their own education. Some of the loans may have been taken out to pay for graduate or continuing education courses required by their jobs, the report notes. The remaining 20 percent of the debt was for loans people took out for their children or other dependents.
The shift is summed up in the chart below. The top bar shows that in 2005, the portion of outstanding federal loans held by people age 65 and up was pretty much nonexistent. By 2013, it became a more noticeable part of the total debt load.
The blue and white bars at the bottom, which single out the portion of the debt load held just by people above the age of 65, show just how much that burden grew over time.
Of course, student debt load is growing for all types of borrowers. And despite the rise among seniors, the share of older people overall who still hold student debt when they enter retirement is small. But the report notes that the debt may cause bigger setbacks for seniors than it does for younger people.
Borrowers age 65 and up are more likely to hold defaulted loans than younger borrowers, making them more vulnerable to aggressive collection efforts. The auditors wrote:
Such debt can reduce net worth and income, thereby diminishing overall retirement financial security. Student loan debt held by older Americans can be especially daunting because unlike other types of debt, it generally cannot be discharged in bankruptcy
As a result, more seniors are seeing a portion of their Social Security benefits garnished to pay back the debt. The number of people whose benefits were cut to pay for student loan debt grew to 155,000 in 2013 from 31,000 in 2002. Among those age 65 and older, the number grew by 500 percent over that time period, to 36,000 from about 6,000.
For many retirees, those efforts to collect on student loan debt can cut into their primary source of income, the Urban Institute noted on Wednesday. About three-fourths of single elderly people receiving Social Security benefits get more than half of their income from Social Security, according to the Social Security Administration. Some 22 percent of elderly married couples receiving Social Security and 47 percent of single people getting benefits count on the program for 90 percent or more of their income.
“There are of course some Social Security recipients who have a lot of money,” says Sandy Baum, a senior fellow with the Urban Institute, “but most of them don’t.”