Most Seniors with Student Loans Have Held the Debt for at Least 15 Years

Retirement-age borrowers are one of the fastest growing segments of the population with student loans, increasing 500 percent over the last 20 years. Despite this population’s significant growth, a lack of government data has made it hard to piece together a clear understanding of the challenges faced by these borrowers. For years, a 2016 report from the U.S. Government Accountability Office (GAO) supplied some of the only administrative data on older borrowers’ default rates. This data drought ended last month when the Department of Education released an updated snapshot of older Americans with federal student loans. These new data include the most recent information on the length of time older borrowers have spent in repayment and the ages of borrowers.

Before the latest data release, New America and others have worked to understand older borrowers’ experiences, piecing together the GAO data with other sources. We suspected the growth in borrowing among seniors was driven by an increase in the proportion of older college students that take out loans and a decrease in the speed of repayment among struggling borrowers. While college pays off for many borrowers, others find little return on their education investment, perhaps because they faced personal hardship or attended a low-value program. These financially-strapped borrowers often pause their loan payments, enroll in affordable income-driven repayment plans (which can lower payments but also extend repayment terms to 20 or 25 years), or spend time in default. Default, the worst case scenario, comes with severe financial consequences including wage, tax refund, and public benefit garnishment. These repayment trends would result in more and more financially distressed borrowers reaching retirement age without retiring their debts.

The new data are consistent with this bleak picture, and offer concrete evidence that most older borrowers first took out their loans over a decade ago. These data also confirm default rates remain high among seniors, suggesting too little progress has been made in helping them over the last almost-decade. Here are the latest numbers:

The new data reveal that more than half of older Americans with federal student loan debt, 1.48 million individuals, first took out their loans more than 15 years ago. This statistic supports the idea that the number of older borrowers is increasing, at least in part, because more and more borrowers are unable to repay their debts within the once-standard ten-year timeframe.

In December 2020, about 800,000 borrowers aged 62 and older—35 percent of borrowers in this age group—were in default on their federal student loans. These high default rates are strikingly similar to those (37 percent among borrowers 65 and older) reported by the GAO in 2016.

The new data also confirm that the likelihood of being in default increases as borrowers age. Most older borrowers have been in repayment for long periods, giving them more time to default. In addition, those who are unable to repay their loans by the time they approach retirement are often financially insecure: close to one-quarter recently received public benefits, 30 percent struggled to pay their monthly bills, and six in ten did not have enough emergency savings to cover three months’ worth of expenses. Once they do default, borrowers often become stuck in that status for years. (In a forthcoming analysis, we will show that close to half of borrowers in default first defaulted at least seven years ago.)

As a result of all these factors, older borrowers are disproportionately represented among those in default. While approximately 5 percent of borrowers in 2020 were 62 and older, 10 percent of borrowers in default were in this age group.

The Department also shared information about the type of loans taken out by federal borrowers aged 62 and older who first entered repayment 15 or more years ago. Echoing findings from the 2016 GAO report, about 80 percent of older federal borrowers carried loans from their own education in 2023. These new data confirm that—at least among long-time federal borrowers—the growth in older Americans with student loans is driven by loans from borrowers' own education, not an increase in borrowing for relatives.

These recent administrative data show a pattern of struggling borrowers aging with their loans and often ending up in default. Over the last several years, the Biden administration has prioritized creating and improving opportunities for federal student loan relief. But our analysis underscores that the work is far from over. We must ensure that older borrowers do not miss out on debt forgiveness, affordable payment plans, and the chance to get out of default.

This will require automated relief where possible and targeted outreach, as older Americans are among the least likely to know about options for student debt relief. The administration should increase communication about the Fresh Start program, which allows borrowers to more easily exit default through September 2024. So far, as reported at the 2023 FSA Training Conference, 345,000 Direct Loan borrowers have enrolled, only approximately seven percent of those with Direct Loans in default before the program launched. The Department must also prioritize helping borrowers with older privately-held federal loans consolidate to receive credit towards eventual loan forgiveness.

The administration should also work to cancel the debt of aging, low-income borrowers unlikely to ever repay their loans through an on-going rulemaking process focused on debt relief. A combination of these forward- and backward-looking policies can help reverse the growth in older borrowers struggling to repay their student debt.