NCLC and New America Foundation Identify Policy Solutions to Reduce the Impact of Student Debt on Older Adults
WASHINGTON – In the past two decades, the number of adults age 60 or older with student loan debt has grown six-fold, and the amount of debt they carry has multiplied nearly 20 times. Some of these older adults took out debt to help family members attend college, but most are still in debt from their own education. Many have very low incomes, and their financial struggles are greater than their counterparts who never attended college.
A new fact sheet from NCLC and the New America Foundation examines the problem and provides policy solutions to protect the financial security of older adults with student loan debt.
“The number of people reaching retirement age while still burdened by student debt has exploded,” said Abby Shafroth, co-director of advocacy at the National Consumer Law Center and director of its Student Loan Borrower Assistance project. “This debt is now threatening millions of people’s ability to meet their basic needs in old age. Fortunately, there is a lot policymakers can do to address this problem, from protecting Social Security benefits and more wages from garnishment, to canceling remaining balances for borrowers who have already spent more than two decades attempting to pay down their loans.”
Some low-income borrowers are in debt for helping their children go to college. Parent PLUS loans are provided by the government to cover the gap between the cost of attending college and the amount the student is allowed to borrow. Even when a parent is calculated to have an Expected Family Contribution of $0, meaning they cannot afford to take on any college expenses, parents are often encouraged to take out high interest Parent PLUS loans with little regard for whether they can pay them back. One-quarter of Parent PLUS borrowers, and nearly half of all Black Parent PLUS borrowers, indicated an Expected Family Contribution of $0, and many simply cannot afford to pay down these loans.
“The government offered Parent PLUS loans to parents regardless of whether they could afford it,” said Tia Caldwell, senior policy analyst at the New America Foundation. “But low-income Parent PLUS borrowers often can’t afford to repay the loans and are excluded from the most affordable repayment plans, putting them at high risk of default and carrying unaffordable debt into old age. Once they become eligible for Social Security benefits, the government can seize a portion of the benefits above a meager $750 per month, pushing many into poverty as they reach retirement age.”
In advance of the resumption of student loan collections in October 2024, when about 800,000 borrowers 62 and older with loans in default may have their tax refunds, wages, and Social Security payments seized, policy analysts and advocates provided the following recommendations for policymakers to better protect the financial security of older adults with student loan debt:
- Cap collections in default at the amount due in an income-driven repayment plan;
- Protect Social Security checks and tax refunds from garnishment;
- Offer grants instead of Parent PLUS loans to low-income families;
- Screen borrowers for loan forgiveness eligibility and automate relief when possible;
- Count time in default towards income-driven repayment forgiveness; and
- Provide targeted loan forgiveness for older borrowers and older loans.
“The bulk of the money that comes from seizing Social Security benefits from struggling older borrowers goes to collection fees and interest, not paying down loan principal,” said Shafroth. “And two out of three borrowers whose benefits are seized will be left with benefits below the federal poverty level. The federal government shouldn’t be pushing sixty- and seventy-year-olds into poverty because they tried to get an education decades ago.”
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