I’m a Boomer With Student Loan Debt: Here’s How I’m Preparing for Retirement

Student Loan Debt Concept With Borrowed Money For College Accumulating Crazy Compound Interest From Non Profit And For Profit Institutions On Laptop Keyboard.
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Conversations about student debt tend to focus on millennials and Gen Z, but suffocating under the weight of college loans isn’t only for the young. 

A new GOBankingRates study of more than 1,000 adults found that nine out of 10 Americans ages 65 and up don’t have any student debt. But the roughly 10% of baby boomers who do are most likely to owe between $20,000 and $40,000. Although that’s a heavy burden, it’s actually low compared to the national average. 

According to the Education Data Initiative, baby boomers carry the highest average individual student debt among all generations — $45,136 per borrower.

So, while most boomers don’t have student debt, those who do tend to have a lot, either from their own loans or those they took out for their children — and many are mortgaging their retirements to keep up with their payments. 

See how your student debt compares.

More Boomers Are Trading Retirement for Their Kids’ College 

In 2020, Fidelity’s annual Snapshot of America’s Student Debt report found that baby boomers owed a whopping 33% more than they did just one year before. Much of that stark increase came from a rise in Parents PLUS loans, which older Americans took out to pay for their children’s educations.

Christopher William, a CPA and the founder of the news aggregator site Balanced News Summary, knows their situation all too well.

Save for Your Future

“I personally owe $50,000 in student loans that I took out on behalf of my children,” William said. “The challenge that I and many other baby boomers face is that our student loan debt will be around for years to come, even into retirement. We are limited in our ability to pay off the debt due to limited income and limited resources. In addition, the interest rates on student loans can be quite high, making it even more difficult to pay off.” 

The Side Effects Are Raided 401(k)s and Indefinite Employment 

The trend of carrying student loans into retirement is a 21st-century phenomenon. According to Business Insider, boomers accounted for just 10% of all college debt in 2004; but, by 2020, the older set’s share more than doubled to 22%. The trend further eroded the prospects of financial security for a generation already woefully behind on saving for retirement — and many have only bad options for coping.

“Older Americans are raiding their retirement accounts, taking out loans against their 401(k)s, making up the gap with credit card spending and working past the usual retirement age,” said Samantha Hawrylack, a personal finance expert, retirement mentor and co-founder of the personal finance site How To FIRE. “This will definitely impact their retirement lifestyle, since their capacity to fulfill their financial goals is being hampered by their student debt.”

Recent research from the nonprofit Transamerica Center for Retirement Studies backs up Hawrylack’s assessment. Roughly half of all boomers expect to work past their full retirement age or already are, and 37% of workers across all age groups have taken loans, early withdrawals and/or hardship withdrawals from their retirement funds, the highest share in the study’s history.

Save for Your Future

Don’t Choose Monthly Payments Over Growing a Nest Egg

William took on only as much college debt as he could comfortably repay and is handling the challenge according to a plan.

“I have been able to manage the payments through careful budgeting and by taking advantage of the various repayment plans available,” William said. “This has allowed me to keep up with my payments while also setting aside funds for my retirement.”

That last part is crucial for all older Americans with college debt.

“It’s easier said than done, but continue saving for retirement,” said Laura Sterling of Georgia’s Own Credit Union, the second-largest credit union in Georgia. “While it may seem difficult to pay off debt and save for retirement simultaneously, it’s important not to choose one over the other.”

Managing Unmanageable Late-Life Student Debt

William also mentioned taking advantage of special repayment programs, which might hold the key to keeping up with payments while also building a nest egg.

“Depending on your financial situation, you can enroll in an income-driven repayment plan (IDR),” Sterling said. “With an IDR, your payments are based on a percentage of your discretionary income. After a repayment period of 20-25 years, your remaining balance is forgiven.” 

Boomers with college debt might also look into student loan forgiveness programs. 

“Many jobs now qualify for the Public Service Loan Forgiveness Program,” Sterling said, “and, if you work in a public service job, you may qualify.”

Another option is to transfer student loans back to the student if you took them out on your child’s behalf. 

Save for Your Future

“If you co-signed or borrowed for a child or another individual, consider transferring those loans to the relative or person receiving the degree,” Sterling said. “Your student loan servicer may be able to provide more information.”

Whatever you do, don’t default. 

“Even if you declare bankruptcy, defaulting on a government loan does not discharge the amount owed,” Hawrylack said. “Instead, the loan balance grows as a result of late fines and service charges.”

Missing too many payments could also threaten the economic lifeline that many retirees count on to stay afloat. 

As Sterling said, “Defaulting on student loan debt could impact your Social Security.”

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