Millions of Americans could see their Social Security retirement payments cut by $300 a month
Millions of older Americans are facing a financial challenge that could jeopardize their retirement plans: outstanding student debt.
Although student debt may be seen by many as a problem that mainly affects younger workers, there are 2.2 million people over the age of 55 with outstanding loans.
If they still owe student loans when they retire, they risk having up to 15 percent of their Social Security benefits collected at source by the government if they can’t pay off their debts.
Social Security retirement benefits vary but average $1,907 per month, according to officials. Losing 15 percent of that would be $286.
The burden of student debt hanging over older workers is hindering their ability to retire comfortably, according to new insights from the New School’s Schwartz Center for Economic Policy Analysis.
The weight of student debt hinders older workers’ ability to retire comfortably
Older workers struggling with debt face student loan repayments well into their later years report found it.
On average, workers between the ages of 55 and 64 take almost 11 years to pay off their student loans, while workers over 65 take 3.5 years, Fed data shows.
Although the Biden administration has forgiven $167 billion in student loans to 4.75 million Americans so far, that aid is only intended for certain groups, such as those who work in the public sector.
Millions of elderly people still have student debt. In fact, the report shows that middle-income workers age 55 and older represent the highest percentage of all student loan borrowers.
‘Older debtors lack the characteristics of younger debtors – more prime-age working years remain [to earn a salary]”more time to save for retirement – making it harder for them to achieve the promised ‘return’ on their investment,” the report said.
The debt burden also falls disproportionately on the shoulders of lower income earners.
The Schwartz Center found that half of all debtors over age 55 – who are still working – earn less than $54,600.
This means it could be harder for them to save because they still have to put money towards loan repayments – and may have to rely more heavily on Social Security once they reach retirement age.
Others may not be able to retire at all, like the millions of Americans over 65 who are still working.
Approximately 14.9 percent of these people over 55 have not completed the diploma for which they took out a loan, the report shows.
This means that not only do they have to pay back the loans, but they also have to do so without benefiting from the expected increase in income from a completed education.
“These older workers face the dual consequences of both indebtedness and a lack of improved earning capacity, making them particularly precarious,” the report said.
President Biden has forgiven $167 billion in student loans, but many Americans are still in debt
When a debtor cannot pay a student loan, the report adds, the loan becomes “delinquent.”
Delinquent federal student loans are one of the few circumstances that cause Social Security benefits to be garnished, reducing retirement income, the report said.
The authors of the report want new laws to prevent this.
It suggests that policy interventions, including eliminating Social Security and improvements to the student loan forgiveness program, could ease older workers’ debt burdens and help them save for retirement.
It highlights the Biden administration’s Savings on a Valuable Education (SAVE) Plan, which shortens the timeline for debt relief and means borrowers won’t make monthly payments until their income rises above a certain threshold.
The report comes at a time when Americans are increasingly questioning the value of a college degree — and whether the potential cost of an education is worth the returns.