Student loan debts are clashing with retirement (2024)

Student loan debt is posing a threat to the retirement plans of a million older Americans, a new report has found.

Analysis conducted by the Schwartz Center for Economic Policy Analysis has found that more than a million Americans gearing up for retirement—aged 55 to 64—still hold debt from their college years. It found that lower income Americans were more likely to still be paying off higher education funding when compared to the top income bracket.

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There are over 43 million Americans who currently have outstanding student loan debts, with an average federal loan repayment balance standing at $37,088 as of March 2024, according to the Education Data Initiative. Health care technology firm Abbott has reported that student loans are the third largest form of debt in the U.S. after mortgages and vehicle repayment plans.

According to calculations by the Schwartz Center based on data from the Federal Reserve Board's 2022 Survey of Consumer Finance, only 3.7 percent of debtors over the age of 55 were among the top 10 percent of earners, with incomes exceeding $192,000. In stark contrast, 50.3 percent were in the bottom half of earners, with incomes below $54,600, while 46 percent fell in the middle range, earning between $54,600 and $192,000 each year.

The report revealed that workers aged between 55-64 anticipate needing nearly 11 more years (10.96) on average to pay off the rest of their loans. Those aged 65 and older expect to take an average of 3.5 years to become debt free. It also found that the bottom 50 percent of income earners carry the highest average debt of $58,823.

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"Student loans are portrayed as an investment that helps equalize access to opportunity and financial mobility by enabling students without wealthy parents or other finances to afford college," paper author Karthik Manickam said.

The Biden Administration has taken several steps to relieve student debt for parts of the population. The report advocates for Joe Biden's Saving on a Valuable Education (SAVE) plan to reduce and cancel student loans for millions of Americans. It also backs the 30 Congress members who have called for an end to Social Security garnishing—when federal student loan repayments are taken from retirement benefits.

"This reform would help protect retirees and older workers who are already financially precarious," Manickam wrote. "This basic protection would help many American seniors stabilize their finances, improve their economic security, and be able to retire."

Newsweek has contacted the Schwartz Center for additional comment via email.

A number of organizations have called for the administration to do more to relieve student debt, while a large number of Republicans have pushed back against the relief.

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Earlier this year, a 3-year study conducted by the Employee Benefit Research Institute (EBRI) and JP Morgan Asset Management has found that having student loan debts has a "statistically significant negative impact" on how much college attendees will be able to save for their retirement.

Those with education debts were found to be saving less than their peers without. People earning less than $55,000 who were repaying student debt contributed 5.3 percent to their savings, compared to 5.7 percent for those without debt during the study period. Those with incomes over $55,000 and student loans left to repay saved an average of 6.1 percent, while debt-free individuals saved 7.3 percent.