Student loans can haunt your 'golden' years

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If you don't pay off your student loans before you retire, you can kiss those Social Security checks goodbye.

(Assuming Social Security is still around by the time you're eligible for it, but that's another story…)


According to a recent government survey, a growing number of older Americans are seeing their Social Security checks docked because of outstanding student loan debt.

And while gray hair or retirement may sound like a distant prospect, the impact student debt is having on the elderly serves as a cautionary tale for younger Americans just wading into the world of student loans.

First of all, a reasonable loan - say $10,000 - can balloon to more than six figures as interest accrues. Failure to pay off what starts out as a manageable-sounding loan can turn into a completely unmanageable situation.


Consider Alyse Stone, a 61-year-old counselor for disabled adults in Oregon who says she'd like to begin thinking about retirement, but faces $70,000 in student loans.

Stone decided to pursue a doctoral degree in her 40s as a single mother. She had never taken out student loans, but thought the degree would be worth the investment. That's looking less likely these days. She didn't complete the degree because she didn't feel the school offered enough support and continues to work the type of job she held before taking out the loans.


"I feel really sort of trapped," she said. "When I think back on it now, I wish I'd known more. I wish I had been better counseled by somebody, anybody."

The lesson? Read the fine print, only take what you need, and if you think you may be in over your head, call your lender and ask about things like income-based repayment options. Do not just go into default on your loans. If you have a federal loan, the government will track you down.


"It's a lot harder when you're 60, let me tell you," Stone said.

Which brings us to the second point.

If someone fails to make payments on a federal loan, the government can dock Social Security checks, disability checks and survivor benefits. According to the report, the number of people whose Social Security checks were docked to pay student loan debt increased fivefold from 31,000 to 155,000 between 2002 and 2013.


Limits on how much the government can dock were put into place in the late '90s - a move aimed to prevent seniors who are no longer working from falling into poverty. But the amount protected has since fallen below the poverty line, the report said.

The lesson? Ignoring the problem does not make it disappear. Simply turning a blind eye to your loan payments and letting the balance skyrocket may seem tempting in the short-term, but it could jeopardize your federal benefits down the line.


A proposal by Senator Elizabeth Warren (D-Mass.) would allow people with older student loans to refinance them at current, lower rates, but it failed to clear the Senate in June. While the idea has many Democratic backers who say lawmakers need to help Americans struggling with student loans, Republicans objected to a tax increase that would have funded the proposal. Republicans argued it could prompt people to take out more loans than they can realistically pay off.

The fact that we're talking about someone your grandpa's age who is struggling to repay debt might give you a sense of security ("That will never be me!"), but it would be false security for many young Americans.


Student debt among young people has soared in recent years. And while salaries have largely stagnated, average student debt has spiked.

Some studies suggest young people are already less likely to purchase houses and, in some cases, delay marriage, because of outstanding student debt. Paying off debt can certainly impact savings and 401K contributions, meaning young people who are struggling to save money now because they are making loan payments will have less saved up down the line when it's time to retire.


And if you're still dealing with loan payments when you do finally stop working, the benefits you're expecting may end up garnished, making your "golden years" a lot less golden.

Emily DeRuy is a Washington, D.C.-based associate editor, covering education, reproductive rights, and inequality. A San Francisco native, she enjoys Giants baseball and misses Philz terribly.

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