University of Virginia

Student loans at 50?

According to a piece in the Washington Post by Ylan Q. Mui, student loans are not just for students.  The Federal Reserve Bank of New York released data that show that roughly 20% of student loans that are in default are owed by borrowers over the age of 50.  Ms. Mui attributes this to co-signing, to adults returning to college, and to the inability of borrowers to discharge student loans through bankruptcy.  Who knows.  Borrowers over 50 would have gone to college in the 1970s and 1980s and college was not so expensive then, nor were loans so easily available, so these debts are most likely not lingering from their undergraduate years.  And, note that the 20% figure is for loans in default, so it’s not just that they have the loans, it’s that they aren’t paying.

What does that mean for the hordes of new borrowers who are leaving college with average loans of $25,000 and facing a grim job market?  Student loans might affect life decisions like getting married and buying a home.  (Theories have been postulated that the decline in marriage rates is due in part to debt problems.) The loans certainly delay retirement savings since money is being diverted to repayment of debt.  Now, with data showing the impact on seniors, the real effects might be worse than we knew, at least for some families.

The clear takeaway:  avoid debt if you can.  If you have to include loans in your financial aid package, treat them with respect.  Make a financial plan for your future that shows what you expect to earn after college, what you will need to live on, what you can donate, and what you need for debt.  Parents:  no one will make your teenagers do this if you don’t.