Losing your Social Security benefits after working your entire life can be devastating. Unfortunately, this is the reality for millions of older Americans who are seeing their monthly benefits reduced due to student debt.
It’s often assumed that student loan debt is a problem for younger people, but many older Americans also struggle with it. In fact, 2.2 million people over the age of 55 still owe money on their student loans. When they retire, they risk losing up to 15% of their Social Security benefits if they have outstanding student debt.
Why Benefits Are Lost
According to the Social Security Administration (SSA), the average retirement benefit is $1,900 per month. New findings from the Schwartz Center for Economic Policy Analysis at the New School show that student debt makes it hard for older workers to retire comfortably.
If you have student debt, you could lose around $286 per month because your Social Security benefits can be garnished if your federal student loans become delinquent. This reduces retirement income and has led to calls for legislative changes to prevent this from happening.
Policy Changes
The study emphasizes the need for policy changes, such as reducing the amount of Social Security benefits that can be cut and enhancing student loan forgiveness programs. One such program is the Savings on a Valuable Education (SAVE) Plan introduced by the Biden administration.
This plan aims to reduce the time needed for debt relief and only requires monthly payments if borrowers’ income exceeds a certain amount. However, these changes might not be enough to stop retirees from losing their Social Security benefits.
Insufficient Assistance
The Schwartz Center for Economic Policy Analysis found that older people with a lot of debt will likely be repaying their student loans well into old age. Federal data shows that workers aged 55-64 typically need over 11 years to pay off their college loans, while those over 65 need about 3.5 years.
Despite the Biden administration forgiving $167 billion in student loan debt for 4.75 million Americans, this relief is limited to certain groups, like public sector employees. Many older Americans still struggle with student debt.
The Burden on Older Borrowers
Most older student loan borrowers are middle-class workers aged 55 and above. Unlike younger borrowers, older people have fewer working years left and less time to save for retirement, making it harder to benefit financially from their education.
Lower-income individuals bear a disproportionate share of this debt burden. For example, half of all borrowers over 55 who are still working earn less than $54,600 annually. This makes it difficult to save for retirement while still paying off loans.
As these individuals age and retire, they may rely more heavily on Social Security benefits. Furthermore, some may not be able to retire at all, joining millions of Americans still working at age 65. Notably, 14.9% of these 55+ workers haven’t completed the degree for which they borrowed, meaning they must repay loans without the expected increase in income a degree would bring.
The situation is dire for many older Americans with student debt. Losing a portion of Social Security benefits can severely impact their financial stability during retirement. While policy changes like the SAVE Plan offer some relief, more comprehensive solutions are needed to address this growing issue.
Ensuring that older workers can retire comfortably without the burden of student debt requires significant legislative action and support. How will the government address this issue moving forward? Will more targeted relief programs be implemented? Only time will tell.
FAQs
1. How many older Americans have student debt?
2.2 million people over the age of 55 still owe money on their student loans.
2. How much of their Social Security benefits can older Americans lose due to student debt?
They can lose up to 15% of their Social Security benefits if they have outstanding student debt.
3. What is the average monthly Social Security retirement benefit?
The average retirement benefit is $1,900 per month.
4. What is the SAVE Plan?
The Savings on a Valuable Education (SAVE) Plan is a program introduced by the Biden administration to reduce the time needed for debt relief and require monthly payments only if borrowers’ income exceeds a certain amount.
5. Why is student debt a bigger problem for older Americans?
Older Americans have fewer working years left and less time to save for retirement, making it harder to benefit financially from their education and pay off their loans.