The findings were so startling, Judith B. Miller, a researcher at MIT’s AgeLab decided to head up a project examining how college debt affects family dynamics, long-term financial planning and retirement for adults ages 25 to 75.
"There was a lot of anger,” especially among individuals nearing retirement age who've carried their college debt for many years, some for 30 or more years, Miller said.
Adults over 50 with college debt from paying for their loved ones’ education had some of the most profound emotional responses, Miller said.
One man in his early 60s reported that he had taken out $300,000 in loans for all four of his children and still owed around $200,000. He said that he and his wife made financial sacrifices when they were younger in order to be active parents, which meant working less or holding positions that offered more flexibility but less pay. Now he's “literally paying the price because he needs to be working longer so that he can be repaying these loans,” Miller said.
Other focus group participants reported taking out loans for their children, for themselves and even accumulating large credit card bills to pay for tuition bills.
Younger students who go to college can often look forward to higher incomes that may enable them to pay off student loan before retirement. But borrowing for loved ones, as many Americans 50 and older have done, “doesn't increase your earnings potential,” the AARP report found.
Repayment options for borrowers who take out loans for someone else's education are also sometimes less flexible or borrowers 50 and older don’t take advantage of them, the AARP said.
Federal parent PLUS loans are eligible for a less generous income-driven repayment plan that can be difficult to enroll in, for example.
In fact, most borrowers who could benefit from the income-driven repayment plans don't sign up for them, federal data showed. That's also true for borrowers age 50 and up. Such plans not only allow borrowers to pay lower monthly installments but also can offer debt forgiveness after 20 or 25 years.
The AARP is supporting changes to federal student loan policies that might help older borrowers, including allowing those who are in default to enroll in income-driven repayment plans and prohibiting the government from taking money out of Social Security benefits and other federal payments to borrowers in default. The group also wants more loans to be dischargeable in bankruptcy, especially loans without income-based repayment options and “private loans that lack death or disability discharges."