06-05-2024
New research from the Schwartz Center for Economic Policy Analysis looked at over 2.2 million people over 55 with outstanding student loans. Half of these borrowers were earning less than $54,600, making it tough to repay their loans. These same individuals owe the highest average debt at $58,823. The next group, individuals with incomes between $54,600 and $192,000, owe an average debt of $48,174. People who took out financial aid but did not complete their degrees face the most financial risk because they lack higher earning power (about 14.9% of workers aged 55 to 64 and 17.3% of workers over 65).
According to the researchers, these lower- and middle-income workers must make difficult decisions about whether to reduce their retirement savings or delay retirement to pay their student loans. It can take up to 11 years for 55+ people to pay off their loans. If these individuals default on their loans, debtors can garnish their Social Security up to $2,500 annually. Government policies that forgive student debt, make repaying debt easier, and prevent Social Security garnishment can reduce the negative impact of these obligations on older workers.
Anyone taking on student debt, particularly older workers, should consider whether the investment will pay off. A certified financial planner speaking to CNBC recommended that workers assess their ability to make payments and whether it will increase their earning power.