Older Americans owe nearly double the amount of student debt as new grads

Although student loan debt is often portrayed as a problem that primarily holds younger generations financially back, Americans ages 45 and older hold significantly higher balances on average than recent graduates, according to a new report.

An analysis of Credit Karma member information reveals that 23% of the 21 million people in debt are over the age of 45, with an average balance of $47,000. The 45 to 54 age group, which is part of Generation X, is the most indebted: on average $49,000. At the same time, new grads with student loan debt have an average balance of around $28,950.

Balances are high due to a confluence of factors, says Colleen McCreary, consumer finance advocate and Credit Karma’s director of human resources. Federal student loans had higher interest rates in the 1980s and early 1990s than they do today, causing balances to grow faster; some borrowers may be parents who have taken out loans for their children; others may return to school later in life; and wages simply haven’t kept up with the cost of living, giving borrowers less money to spend on their loans.

“All of this is probably going to delay people’s retirement for a lot longer,” McCreary said.

Those loan balances and payments can delay retirement, or at least make it more stressful, McCreary says. Out of 464,000 Credit Karma members over the age of 65 with student loan debt, the average balance is $44,000.

“People might think, ‘I already own my house, so why bother?’ In effect, your wages can be garnished, your Social Security benefits can be garnished, your disability can be garnished” if you don’t make the payments on time, McCreary says. “It jeopardizes your potential retirement plans.”

Student debt could become more stressful very soon

The statistics are especially worrisome as we approach Sept. 1, when federal student loan repayments — which were suspended at the start of the COVID-19 pandemic two and a half years ago — will resume.

So far, the payment pause has been extended each time the expiration date has approached. But President Joe Biden has not said whether borrowers will be able to continue waiving the monthly bill.

With inflation, rising house prices and increasing layoffs, McCreary says it will be difficult for many households to start paying back their student loans again. Data from Credit Karma shows that 90% of members who have federal student loans did not make payments during the break.

“If the forbearance ends, unless they’ve saved up all that money, I think we’re in a pretty precarious position,” she says. “The picture starts to look really bleak if abstention doesn’t continue.”

She advises those who will struggle to repay their student loan to apply for an income-based repayment plan. This can reduce the amount you owe each month, sometimes to $0. Plus, if you’re older and your kids are asking you to co-sign a loan, think carefully about what that extra burden will mean for you and your retirement. As the advice goes: you can borrow to pay for your education, you can’t borrow to fund your retirement.

How will the resumption of federal student loan payments affect your budget? Email Alicia Adamczyk with your story.