Student loan debt is putting retirement plans at risk for millions of older Americans as Social Security withholding concerns grow
Student loan debt is no longer just a challenge for recent college graduates. A growing number of Americans in their 60s and 70s are entering retirement while still making monthly loan payments, with some seeing balances grow despite decades of repayment.
More than 3 million people age 62 and older now hold federal student loan debt, according to Education Department data. For many, rising balances, fixed retirement incomes and upcoming federal repayment changes are forcing difficult financial decisions, while borrowers who default could even see a portion of their Social Security benefits withheld.
Student loan debt is following borrowers into retirement
Federal student loan debt among older Americans has grown significantly over the last several years. More than 3 million people age 62 and older now owe federal student loans, up from 1.8 million in 2018.
Many of these borrowers expected to have their loans paid off long before retirement. Instead, they are juggling student loan payments alongside mortgages, healthcare expenses and everyday living costs. Rising delinquency rates among older borrowers reflect those mounting financial pressures, particularly for retirees living on fixed incomes.
For borrowers who eventually default on federal student loans, the consequences can extend beyond collection calls. They may face wage garnishment, tax refund offsets and reductions to Social Security benefits through federal collection programs.
Ballooning balances are leaving borrowers shocked after decades of payments. One of the biggest frustrations for older borrowers is discovering that years; or even decades; of regular payments have done little to reduce what they owe.
After earning graduate degrees, some borrowers focused on raising a family and buying a home which strained their finances. To lower their monthly payments, they consolidated their loans and entered a repayment plan that extended the repayment period. While it reduced immediate costs, years of compounding interest dramatically increased their total balance.
Interest charges continue to push balances higher and financial experts say the experience is far from unique.
Many repayment plans, particularly older income-based options, allowed unpaid interest to accumulate when monthly payments were too small to cover accruing interest. As a result, balances often continued growing despite borrowers making payments for years.
“It is very typical to see a borrower whose balance has probably doubled if not more since when the loan went into repayment,” said a student loan advocate. Graduate school borrowers and Parent PLUS loan recipients have been especially vulnerable because they often borrowed larger amounts that accumulated interest over long repayment periods or went back to school for a second degree later in life.
Parent PLUS loans are creating retirement burdens for many families
Not all older borrowers took loans for their own education. Many are still repaying Parent PLUS loans they borrowed to help their children attend college.
Although the children have done well, the parents are still footing this bill. Living on a fixed income, they worry that unexpected medical expenses could make repayment even more difficult.
July repayment changes could increase monthly payments
Many older borrowers are preparing for higher monthly bills following federal student loan repayment changes that took effect in July.
The Trump administration’s overhaul of the federal student loan system replaced several repayment options with new plans that, for many borrowers, require larger monthly payments and longer repayment periods before remaining balances can be discharged.
Some of the new rules are designed to prevent balances from growing indefinitely. One repayment option waives unpaid interest when borrowers make their required monthly payment, helping stop negative amortization that has plagued many long-term borrowers. New annual borrowing limits for Parent PLUS loans are also intended to reduce future debt accumulation.
The end of the SAVE plan is creating new financial challenges
The Biden administration introduced the SAVE plan in 2023, calling it the most affordable federal student loan repayment option ever created after the Supreme Court struck down earlier broad based student loan forgiveness. The program lowered monthly payments for many borrowers and shortened the timeline to loan forgiveness for some participants.
However, Republican-led lawsuits challenged the legality of the program. Beginning in July 2024, millions of borrowers were placed into administrative forbearance while the courts considered the case.
Earlier this year, a federal appeals court ordered the program to end, prompting the Trump administration to begin transitioning borrowers into new repayment options.
Some retirees are using savings to finally eliminate their debt
For some borrowers, eliminating student debt means sacrificing retirement savings.
Older borrowers who returned to school to earn a master’s degree have carried student loan debt into retirement. Some of them have decided to withdraw their savings to pay off the remaining balance. Although paying off the loans means working longer to rebuild their savings, they remains optimistic.
Older borrowers are organizing to seek relief. Growing frustration has prompted many older borrowers to organize online and advocate for policy changes. Some seniors have shared personal stories with government officials, including President Trump, in hopes of securing relief.
Many members argue they have already repaid far more than they originally borrowed because of years of accumulated interest.
Default can put Social Security benefits at risk
For retirees living primarily on Social Security, defaulting on federal student loans can have serious consequences.
Unlike most private creditors, the federal government has authority under the Treasury Offset Program to collect defaulted federal student loan debt by withholding a portion of Social Security benefits.
Current rules generally allow the government to offset up to 15% of a recipient’s monthly Social Security payment, although the actual amount depends on applicable collection rules and individual circumstances.
Private student loan lenders generally do not have the same authority to garnish federal Social Security benefits, though they may pursue other collection methods, including lawsuits.
Borrowers still have options before default. Financial experts encourage borrowers struggling with student loan payments to seek assistance before loans fall into default.
Potential options include income-driven repayment plans, loan rehabilitation programs and loan consolidation, all of which may help borrowers regain good standing or reduce monthly payments depending on their circumstances.
For retirees facing multiple financial obligations, addressing other debts; such as credit cards, medical bills or personal loans; may also improve their ability to remain current on student loan payments.
As millions of Americans carry education debt well into retirement, their experiences underscore how student loans can remain a financial obligation long after careers are expected to end.
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John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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