When you think about student loans, you probably imagine a fresh-faced 23-year-old working an entry-level job or a 30-year-old getting their master’s degree after a few years in the workforce.
But many student loan borrowers are older Americans, and more have joined them in carrying debt. More than 3.5 million at or above the age of 60 hold student loan debt, collectively amounting to over $125 billion, according to 2023 data from the think tank New America.
And even though some are living off substantial nest eggs or healthy retirement accounts, others are barely surviving on a fixed income. That makes paying their student loan bills much harder, especially since many have been forced to retire due to age, health or both.
Around 6% of adults age 50 and older — 7.2 Americans — haven’t paid off their student loans, according to Urban Institute’s August 2022 analysis. Among those borrowers, 8%, or 580,000 individuals, are behind on payments. The median amount of delinquent debt was approximately $11,500.
Reasons for student loan debt
The student loan debt burdening older adults comes from two main sources: their own student loans, and student loans taken out on their children’s behalf (also known as Parent PLUS loans). As of 2022, Parent PLUS loans equaled about $106.3 billion and had increased about 63% in seven years.
“Parent PLUS loans are the fastest growing loan group,” said Student Loan Planner consultant Meagan McGuire.
Begun in 1980, Parent PLUS loans were created to help parents finance their children’s education. Undergraduate students can only borrow either $31,000 or $57,500 in total, while the average annual tuition is $38,270. That can leave a huge gap that grants and scholarships simply can’t fill.
However, through Parent PLUS loans, parents can take out 100% of the cost of attendance. There is no aggregate limit on how much a parent can borrow. And if they have multiple children, they can take out Parent PLUS loans for all of them. Parent PLUS loans are much easier to acquire than private student loans.
Private student loans require decent credit (usually a credit score of 640 or higher) and a current income source. Parent PLUS loans are much easier to get. There is no minimum credit score; all you need is a relatively clean credit history.
“To be eligible for a Parent PLUS loan, the borrower must not have an adverse credit history,” said Mark Kantrowitz, author of “How to Appeal for More College Financial Aid.” “An adverse credit history involves either a two-year lookback for a serious delinquency (more than 90 days) or more than $2,085 in debt in collections; or a five-year lookback for a default, foreclosure, repossession, bankruptcy discharge, tax lien, default determination, write-off or wage garnishment.”
The downside? Parent PLUS loans have higher interest rates and fewer repayment options than regular student loans. For the 2024-25 school year, Parent PLUS loan rates are 9.08% compared to 6.53% for undergraduate student loans.
And because there’s no official credit check, parents can often end up borrowing more than they can actually afford to pay back.
Many parents take out Parent PLUS loans with the understanding that their child will graduate, find a good job and make payments on their behalf. However, Parent PLUS loans are only in the parent’s name. And if the child can’t afford to pay back those loans, the parent remains legally and financially liable.
This can create an awkward family dynamic — not to mention a dicey financial situation.
If you default on your student loans, the federal government can garnish your wages, including Social Security benefits
The only way to transfer Parent PLUS loans to the child is if they refinance the loans into their own name. There’s no way to do this on the federal level — the child will have to refinance with a private lender, “assuming the child has the ability to be approved and their credit is worthy of a refinance,” Mcguire said.
Ignoring those loans can have drastic consequences. If you default on your student loans, the federal government can garnish your wages, including your Social Security benefits. This can leave older adults in an even worse position.
What are the repayment options?
Income-contingent repayment. Even though Parent PLUS loans are not eligible for the same range of repayment plans as regular student loans, they still qualify for income-contingent repayment (ICR), extended repayment and the graduated repayment plans.
The ICR plan is the only plan available that offers loan forgiveness. If you have a low income and choose the ICR plan, your monthly payment may be as low as $0. After 20 or 25 years on the ICR plan, your remaining balance will be forgiven. However, you may have to declare the forgiven amount as income on your taxes.
Discharge. Older adults who are disabled may qualify for the federal government’s Total and Permanent Disability Discharge. This program is only available if you yourself are disabled; a child’s disability does not count.
“A borrower on fixed income may be able to qualify for an income-driven repayment plan with a very low payment”
Bankruptcy. Filing for bankruptcy can be fairly straightforward if you have credit card debt or are underwater on your mortgage. But discharging student loans through bankruptcy is notoriously harder. According to Kantrowitz, you can only qualify for bankruptcy if you prove that your loans are causing you “undue hardship.”
But because borrowers with federal loans can choose from forbearance, deferment or income-driven repayment, it’s that much more challenging to prove undue hardship.
“A borrower on fixed income may be able to qualify for an income-driven repayment plan with a very low payment, even a zero payment, which will prevent bankruptcy discharge as an option,” Kantrowitz said.
What to do if you have private student loans?
Parents who took out private loans for their children have an even harder road than those with federal loans.
Private loans do not come with income-driven repayment plans, disability discharge or loan forgiveness programs. They’re also not even easy to discharge in bankruptcy.
One of the only options is to refinance your private student loans. You can refinance to a longer repayment term, which will result in a lower monthly payment. This can make it easier to manage your payments if times are hard.
However, refinancing also depends on your credit score, income and debt-to-income ratio. If you have a high student loan balance and a relatively low income, refinancing may be close to impossible.
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