Student loan debt is soaring among adults age 50 and older and is likely to dramatically cut into their ability to save for retirement, according to a new AARP report

By December of last year, borrowers age 50 and older had student loan debt that had mushroomed to $289.5 billion, up from $47 billion 15 years ago. Today Americans age 50 or older account for 20 percent of the $1.5 trillion student loan debt in America, the report said.

In addition to borrowing for children and even grandkids, "many people are carrying their own student loan debt for longer periods of time,” said Lori Trawinski, AARP's director of banking and finance and lead author of the report.

“In the pre-retiree years, which we typically consider to be ages 50 to 64, people should be at their peak earning years and also accumulating retirement savings, hopefully at adequate rates. To the extent that their budget is squeezed by the need to make student loan repayments, it's no doubt cutting into their ability to save for other purposes," Trawinski said.

In addition to potentially carrying their own balances, many older Americans are also signing for or co-signing for childrens’ and grandkids’ student loans. “Paying for higher education is becoming an intergenerational burden, ensnaring more older adults and delaying or battering the retirement plans of many,” the report said.

Beyond the repayment burden, default rates on the student loan debt have become a threat to Americans’ retirement security, making it possible for the federal government to take up to 15 percent out of derelict borrowers’ monthly Social Security benefits.

In 2015, about 29 percent of the 6.3 million borrowers ages 50-64 were in default, meaning payments on their student loan were at least 270 days past due. Among the 870,000 people over age 65 who had student loan debt that year, 37 percent were in default. 

AARP surveyed more than 3,000 Americans age 40 and older about how they financed higher education for their loved ones. The survey found that among adults 50 and older, cosigning a private loan was the most common way to help pay for someone else's education, something that 45 percent of respondents did. Among the cosigners, 25 percent said they had to make at least one payment on the loan, an expense that caught many of them by surprise.

In fact, almost everybody who needs a private student loan is going to need a parent or grandparent to be a cosigner on it, according to the National Consumer Law Center’s Student Loan Borrower Assistance Project.

As many financial advisors know, growing student loan balances among this group are without a doubt a shock to the retirement planning of older Americans. MIT’s AgeLab recently found that of 100 people in a focus group, 29 who are 50 or older still have student loan debt for their loans or those of loved ones.

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."

The AARP report also said a majority of the respondents who cosigned for a private loan did not know that they may be eligible to have their name removed from the loan if the borrower has made enough on-time payments.

“Doing so is in [the] cosigners’ interest because they will no longer be legally liable for the loan if the primary borrower defaults in the future,” the report said.