The Student Loan Debt Threat: An Intergenerational Problem

• Student loan debt is an intergenerational problem, burdening borrowers of all ages and threatening the long-term financial security of millions of families.
• While student loan balances have increased across all age groups, growth has been greatest for older borrowers.
• Defaults of student loans increase with age of the borrower.
• Parents and grandparents take on debt to help their children and grandchildren finance their education, AARP survey research found.
• The AARP survey found that 25 percent of private student loan cosigners ages 50 and older had to make a loan payment because the student borrower failed to do so.

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Student loan debt is increasingly becoming a burden for people of all ages, with Americans owing $1.5 trillion dollars as of December 2018, according to the Federal Reserve Bank of New York. People ages 50 and older owe 20 percent, or $289.5 billion, of that total, up from $47.3 billion in 2004. This represents more than a five-fold increase. The overall increase reflects a sharp rise in both the number of families borrowing and the amounts they borrow.

Over the past three decades, the cost of attending college has increased dramatically. The average cost of attending a four-year college more than doubled (on an inflation-adjusted basis) during this period. Meanwhile, nationally, state and local funding per student for higher education decreased. In addition, family incomes have not increased enough to keep pace with inflation, much less the increase in college costs.

The increased debt burden reaches beyond the young adult who takes out a student loan. In many families, parents, grandparents, and other relatives are taking on debt to help finance a family member’s education. This includes taking out loans directly or cosigning loans for students who cannot qualify on their own.