Aging Student Debtors

As the recession descended, the number of student borrowers continued to grow -- and more than ever, those carrying balances are likely to be in their 30s or older, according to new data from the Federal Reserve Bank of New York.

The New York Fed, which has become a chronicler of student loans in America through quarterly reports, recently released historical charts showing the growth in borrowers, balances and delinquencies over the past seven years. They show a steady upward march toward more borrowers, more loans and more debt.

Since 2005, 14 million more people have taken on student debt. The majority of borrowers still paying back their loans are in their 30s or older. And the average debt per borrower has steadily climbed, from $15,651 in the first quarter of 2005 to $24,301 in early 2012.

Despite the recent attention paid to recent college graduates burdened by six figures of debt and unable to find jobs, borrowers under 30 are doing better than most on paying back their loans. Only about 6 percent of them are more than 90 days late -- the most serious form of delinquency -- in making payments. Borrowers in their 40s, on the other hand, have a delinquency rate double that of their younger counterparts, at about 12 percent.

Over the past seven years, the ranks of borrowers over 30 have continued to grow as former students with longstanding loans continue to chip away at balances and new, nontraditional students took on debt for the first time. Borrowers in their 30s or older made up 54 percent of all student debtors in 2005; by early this year, they were almost two-thirds of all borrowers.

The growth has many causes. Long repayment terms for federal loans can stretch up to 30 years, well into middle age even for traditional-aged undergraduates. Older students are more likely to enroll in college during a recession, and are also more likely to fall into default. And as student borrowing has grown over all, and the availability of home equity lines of credit has fallen, parents have become more likely to co-sign their children’s loans or borrow on their behalf.

In some cases, retirees are finding their Social Security checks docked to repay delinquent federal loans, and parents are paying for their children’s education while still grappling with their own student loans.

“Student loans have become a fact of life for more and more Americans at every age,” said Lauren Asher, president of the Institute for College Access and Success and co-founder of the institute’s Project on Student Debt.

The trend isn’t entirely new. Borrowers in their 40s have always had the highest delinquency rate, which inched up from 9 percent in 2005 to a peak of 13 percent in late 2011. Of the delinquent borrowers who consult the National Consumer Law Center for help, many are older than 35, said Deanne Loonin, a lawyer with the center and the director of its Student Loan Borrower Assistance Project. An ongoing survey by the center, of borrowers in default, found the average age was 43.

“I am hearing from more and more and more parents, who in some cases still have their own debt, and in most cases are contacting me about having co-signed on their children’s debt.”
--Deanne Loonin, National Consumer Law Center

“One thing we see is a high percentage of nontraditional student borrowers,” Loonin said. “So many characteristics of nontraditional borrowers are also risk factors for delinquency and default,” including borrowing at an older age, having a low income or caring for dependents.

Some older borrowers took out loans on their children's behalf, but others still have existing loans from when they were in college, she said. Those borrowers are more likely to have long repayment terms -- a sign of possibly having borrowed more than they could afford to repay -- or to have cycled in and out of repayment, deferring loans or putting them in forbearance and postponing the eventual payoff date, said Mark Kantrowitz, publisher of FinAid.org.

“Delinquency is the cause of the borrower still owing student loans in their 40s, not the effect,” Kantrowitz wrote in an e-mail to Inside Higher Ed. “They were struggling when they graduated, perhaps due to overborrowing, and so chose longer repayment terms, and so are still struggling now. The borrowers who weren’t struggling paid off their loans in their younger years.”

Other older borrowers are in debt from paying for their children’s education. Parents who take out PLUS loans, federal loans intended for parents, can accumulate a high debt burden, said Heather Jarvis, a lawyer who works with student borrowers. “You see pretty alarming figures with how much even an individual person can borrow, and then you look at a parent borrower who may have more than one child,” said Jarvis, who said she recently counseled a single mother who took out PLUS loans for three children in college.

Other parents -- including Jarvis and her husband, she said -- are facing the prospect of paying for college for their children while still repaying student loans of their own, in some cases from graduate or professional school. The result can be a combination of old and new student debt for both generations.

“I am hearing from more and more and more parents, who in some cases still have their own debt, and in most cases are contacting me about having co-signed on their children’s debt,” Loonin said.

Even as those parents contemplate retirement themselves, they still have student loans to deal with. The amount of student debt held by people over 60 has increased fivefold since 2005 (although it remains a small percentage of student debt over all). The average debt for those 2.2 million borrowers is almost $20,000.

“It gets harder and harder to have a lot of debt as you get older, and that’s one of the reasons I talk to older Americans,” Jarvis said. “It’s one thing to be young and broke ... but when you try to have a home and you need to have reliable transportation and you’re all grown up, it gets frustrating.”