A new study by LIMRA Secure Retirement Institute shows retirees are bringing unprecedented levels of student loan debt into their later years. The research showed student loans made up only 4% of debt for pre-retirees in 1989. However, in 2013 student loans now account for 30% of pre-retiree debt. The same is true among retirees, where education loans made up less than 1% in 1989, but now totals 15%.
“As someone moves into retirement, it's very important that they minimize their risk,” said Kristopher Carroll, chief investment officer at Carroll Financial Associates in Charlotte, N.C. “The number one risk is the risk of running out of money, and the best way to decrease that risk is to reduce or eliminate monthly payments that you have to make.”
The new data seems to suggest parents and grandparents are picking up the tab for their children and grandchildren to go to school. In 1989, pre-retirees held an average of only $600 in education loans, but by 2013 that amount grew to $8,000. For retirees, the average education loan debt increased from $400 in 1989 to more than $2,300 in 2013.
“Retirees are carrying unprecedented levels of student loan debt into their golden years,” Roger Cowen, owner of Cowen Tax Advisory Group near Hartford, Conn. He added the situation could be dangerous for retirees, with those in default on federal student loans getting their Social Security payments garnished. Cowan said recent analysis shows that happened to 156,000 Americans in 2013 — three times more than in 2006.