When you think of retirement, what’s the first thing that comes to mind?
No more rush hour, sleeping in, golf during the week, travel and…I bet I know what doesn’t come to mind – student debt.
But people 65-years-old and older are the fastest growing segment of federal student loan debt holders in the U.S.
In fact, according to a Consumer Financial Protection Bureau report, the number of people over age 60 with student loan debt has quadrupled since 2005!
The amount owed by older consumers is $66.7 billion, with 73 percent of borrowers using it to finance a child’s education directly or as a co-signer.
Per the graph on the right, 37 percent of federal borrowers in default are 65+, and the debt is coming due. These people’s Social Security benefits (retirement and disability) are subject to garnishment. However, those with private loans are exempt from Social Security garnishment.
It’s a shame that can happen to people who’ve worked all their lives to enjoy Social Security benefits. But it’s reality for more and more people – 40,000 had their benefits offset as a result of being in default on federal student loans, which is up from 8,700 only a few years ago.
That can be a potentially catastrophic hit for some retirees, as 49 percent of people age 65 and older rely on Social Security as their only income. On top of that, people paying loan debt probably aren’t saving as much as they should.
What a vicious cycle, particularly late in life. I can almost guarantee you, nobody thought about that when dreaming of retirement.