According to the latest figures from the Federal Reserve Bank of New York, student debt is an enormous burden on people—both young and old.
There are now more than 2 million Americans age sixty and older who still owe money on their student loans—three times the number as recently as 2005—and they owe almost $20,000 per person, as a result of paying for their own education or for the college degrees of one or another family member. As Elizabeth Olson explains, the student-loan payments for the elderly are being automatically deducted from the Social Security income.
“As the baby boomers continue to move into retirement, the number of older Americans with defaulted loans will only continue to increase,” Charles A. Jeszeck, the G.A.O. director of education, work force and income security, testified at the hearing. “This creates the potential for an unpleasant surprises for some, as their benefits are offset and they face the possibility of a less secure retirement.”
More than 80 percent of the outstanding balances are from seniors who financed their own education, the G.A.O. report concluded, and only 18 percent were attributed to loans used to finance the studies of a spouse, child or grandchild.
But the default rate for these loans is 31 percent — a rate that is double that of the default rate for loans taken out by borrowers between the ages of 25 and 49 years old, according to agency data.
“Such debt reduces net worth and income and can erode retirement security,” Mr. Jeszeck said. “The effect of rising debt can be more profound for those who have accumulated few or no financial assets.”
And such student loan debt “can be especially problematic because unlike other types of debt, it generally cannot be discharged in bankruptcy,” he added.
Of course, the student debt of the elderly makes up only a small portion of the enormous debt based on student loans for the population as a whole: as of the end of 2012, almost 40 it was almost 40 million borrowers has racked up a total of almost $1 trillion—an average of almost $25 thousand per person—in order to pay for a college education in the United States.
All the while, mainstream economists and politicians—liberal and conservative alike—maintain that higher education is the solution to poverty, inequality, and everything else that ails the nation’s economy.