The ranks of older Americans with student loans are growing rapidly, as students increasingly lean on their parents and grandparents to help finance their educations, according to a government study published Thursday.
That is raising financial risks for the older generation, many of whom are already struggling to pay off their own mortgage, credit-card and auto loans. Older student-loan borrowers save less for retirement, and some see their Social Security benefits and tax refunds garnished because of unpaid student loans.
The number of consumers age 60 and older with student loans quadrupled to 2.8 million in 2015 from 700,000 in 2005, according to the report from the Consumer Financial Protection Bureau. The average amount they owed nearly doubled over that decade, to $23,500 from $12,100.
The total student-loan debt owed by borrowers age 60 and older stood at $66.7 billion in 2015. People 60 and older represented 6.4% of all student-loan borrowers in 2015, up from 2.7% a decade earlier.
“It is alarming that older Americans are the fastest growing segment of student loan borrowers,” CFPB Director Richard Cordray said in a statement. “We are concerned that student loans are contributing to financial insecurity for many older Americans and that student loan servicing problems can add to their distress.”
Nearly 40% of federal student-loan borrowers age 65 and older are in default, the report said, noting that late and missed payments by older borrowers have increased in the past decade.
The CFPB’s analysis of survey data shows that in 2014, nearly three-quarters of student-loan borrowers age 60 and older said the loans were for a child’s or grandchild’s education, far higher than the 27% whose debt was for their own or their spouses’ educations. Those who finance their family members’ educations either take out loans directly or cosign loans with the students as the primary borrowers.
The rise in the student debt burden among older consumers raises concerns about their retirement security. According to a 2013 survey by the Federal Reserve, the median balance in the individual retirement accounts of consumers with student loans was $31,000, compared with $56,000 for those without such loans. Those consumers are also more likely than others to skip necessary health-care spending, the survey found.
The CFPB’s analysis came less than a month after the Government Accountability Office released a report focusing on the growing number of older borrowers whose Social Security payments are garnished by the government to offset unpaid student loans. Most of those affected receive disability benefits.
Since the CFPB started accepting consumer complaints about student loans in 2012, the bureau has received 1,100 complaints, including 500 incidences related to debt collection of student loans. Many of the complaints suggest that student-loan servicing problems exacerbate the borrowers’ financial problems. Among the issues are the difficulty they face when requesting loan releases or lack of access to loan accounts and information about the status of the loans they cosigned.
The CFPB has been increasing its scrutiny of the student-loan-servicing industry, taking enforcement actions and laying the groundwork for future rules.