Some Face a Lifetime of Student Debt

Inability to repay student loans may affect the financial security of a small percentage of retirees, according to a report by the Government Accountability Office (GAO). 

The GAO points out that student loan debt held by older Americans can be especially daunting because unlike other types of debt, it generally cannot be discharged in bankruptcy. Recent studies have indicated that many Americans may be approaching their retirement years with increasing levels of various kinds of debt, which can reduce net worth and income, and hence diminish overall retirement financial security, the GAO says. (See “Linking Student Debt and Retirement.”)

Comparatively few households headed by older Americans carry student debt compared to other types of debt, such as debt from mortgages and credit cards. The GAO’s analysis of the data from the Federal Reserve Board’s Survey of Consumer Finances shows that about 3% of households headed by those aged 65 or older—about 706,000 households—carry student loan debt. This compares with about 24% of households headed by those aged 64 or younger—22 million households.

Compared with student loan debt, those 65 and older are much more likely to carry other types of debt. For example, about 29% carry home mortgage debt and 27% carry credit card debt. Still, student debt among older American households has grown in recent years. The percentage of households headed by those aged 65 to 74 having student debt grew from about 1% in 2004 to about 4% in 2010. While those 65 and older still account for a small fraction of the total amount of outstanding federal student debt, the outstanding federal student debt for this age group has grown recently, from about $2.8 billion in 2005, to about $18.2 billion in 2013.

The report examines the extent to which older Americans have outstanding student loans and how this debt compares to other types of debt, as well as the extent to which older Americans have defaulted on federal student loans and the possible consequences of default.

To address these issues, GAO obtained and analyzed relevant data from the Federal Reserve Board’s Survey of Consumer Finances, as well as data from the Department of the Treasury, the Social Security Administration and the Department of Education. GAO also reviewed key agency documents and interviewed knowledgeable staff.

The GAO’s report can be downloaded here