Student Loan Forgiveness that Sticks for Gen Xers, Boomers
While the thought of people aged 50 and over still owing student loan balances may sound implausible, it's far more common than many may realize
Editor’s note: Elizabeth Sanders is a pseudonym for the author, used to protect the privacy of her financial information and to avert the backlash student loan forgiveness recipients can face.
When the email landed in my in-box in mid-July with the subject line, "You're eligible to have your student loan(s) forgiven!" I assumed it was a hoax. After all, it arrived exactly two weeks after the Supreme Court's stinging rebuke of the Biden Administration's effort to provide $430 billion in student loan forgiveness to as many as 43 million borrowers.
I'm 61, and while the thought of people aged 50 and over still owing student loan balances may sound implausible, it's far more common than many may realize. I'm one of 8.8 million borrowers 50 and older who owe a whopping $380 billion total in student loans. And according to New America, a policy research outfit in Washington, the number of student loan borrowers 60 or older grew six-fold between 2004 and 2023.
My path to still holding student loan debt 25 years after completing graduate school was largely the result of national economic factors that have plagued the financial health of many. One, for instance, is the skyrocketing cost of college education that's increasingly financed by readily available federally insured student loans. Another is the multiple economic downturns and volatility during prime earning years, most notably the Great Recession.
A Great Burden Lifted
After more than two decades of paying what I could afford under what's known as an "income-driven repayment plan" offered by the Department of Education, I was still saddled with more than $28,000 in debt, a balance exacerbated by an 8% annual interest rate. So, imagine my relief a month after I got that initial email, when a second one confirmed that my loan balance had been wiped clean.
My relief came after the Biden Administration chose to be more vigilant in applying a provision in student loan legislation that allowed loans in income-driven repayment plans to be forgiven after a borrower had paid for at least 20 years.
"For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress toward forgiveness," U.S. Secretary of Education Miguel Cardona said in July. "By fixing past administrative failures, we are ensuring everyone gets the forgiveness they deserve."
A Brief History of Student Loans
That I could even contemplate returning to graduate school when I did — in 1994, at the age of 32, with little savings — was because of the student loan program.
The U.S. government began offering student loans in 1958, initially only to students studying engineering, science and education, in response to growing fears that the United States was falling precariously behind the Soviet Union in scientific and technological advances during the Cold War.
Loans became more broadly available with the enactment of the Higher Education Act of 1965, which expanded student loan programs with the goal of providing greater social mobility and opportunity to students of all economic backgrounds.
Betting on My Future
So, I gambled that my post-graduate degree job prospects would be more lucrative than those of my first career as a newspaper reporter, which is not an occupation known for paying well.
"For far too long, borrowers fell through the cracks of a broken system that failed to keep accurate track of their progress toward forgiveness."
When contemplating graduate school, I didn't reflect on the exponential increase in the cost of higher education. I returned to my undergraduate alma mater, an elite private university near a large Midwestern city, because the area offered strong post-graduation career prospects and a support network of college friends still in the area.
Annual tuition in 1984, the year I completed my undergraduate studies, was $8,085. When I returned to graduate school a decade later, those costs had almost doubled, to $15,804. However, unlike my four years of undergraduate studies — which were underwritten by scholarships, financial aid, part-time jobs and about $6,000 in student loans — this new endeavor would be almost entirely financed with student loans.
I borrowed close to $40,000 to cover tuition, fees and living expenses for my 15-month program. Today, tuition alone at that university is a whopping $65,000 annually.
The dramatic increase in costs are part of a nationwide trend that hasn't just occurred at pricey, private universities: Between 2003 and 2023, in-state tuition and fees at the country's largest public universities grew a staggering 175%, according to U.S. News & World Report.
With more U.S. students attending college and relying on student loans to do so, aggregate outstanding U.S. student debt exceeded $1.6 trillion at the end of 2022, according to the Federal Reserve Bank of New York.
A Payoff — Initially
At first, my graduate school gambit paid off. The first job I landed with my newly minted degree offered a 55% increase over my last job. Four years later, I moved to a new job that more than doubled what I earned when I left the newspaper business.
But about a year later, I experienced a lengthy series of career catastrophes. During the 2001 recession, I was laid off from the job that had doubled my salary, and it took me more than a year to land new, full-time employment. Although that job provided a healthy boost in pay, four years later, I was laid off from it, too, along with more than 40% of the company's employees.
After another two years of underemployment, earning a fraction of my previous salary, my husband and I moved cross-country for a promising opportunity that offered another healthy raise. But it was in an industry and a part of the country devastated by the Great Recession, and that job evaporated 14 months later.
For the next eight years, until I was in my mid-50s, my salary stayed stubbornly at about half of what I previously earned. Even today, I still earn less than I did in 2009.
Older Borrowers Struggle
Because of the backing of the federal government, anyone pursuing higher education can obtain student loans, regardless of age or credit rating. The trade-off for that easy access? Student loans are almost impossible to discharge, except in cases of death or serious disability.
When borrowers default, servicers can garnish income tax returns and up to 15% of Social Security payments to satisfy the debt. A 2016 study by the Consumer Financial Protection Bureau found that nearly 40% of borrowers 65 and older were in default, and significantly more likely to go into default as they grew older, with 37% of borrowers 65 and older in default.
Even when older borrowers are able to meet the obligation, having student loan debt imperils their retirement, a 2019 AARP analysis found. Borrowers who delayed saving for retirement to pay off student loans need to work two to seven years longer to amass the same retirement savings as those without student debt, AARP found.
Deferral, Forbearance, Default
As student loan debt mushroomed into a larger share of household financial obligations, borrowers tapped several provisions that can make repayment initially less onerous, but also longer and more costly. First, students can defer payments while they are still in school and often for up to six months after graduation, with the federal government covering the interest cost during that time.
Many borrowers are then eligible for a plan that pegs monthly payments to their income; that usually reduces payments but extends the obligation from the standard 10-year term. After my income began tumbling, I turned to one of these income-driven repayment plans.
Pricey Pause in Payments
And lastly, any borrower can easily apply for and receive loan forbearance for a variety of reasons, including unemployment. However, loans continue to accrue interest, which is capitalized into the loan principal's balance, causing it to balloon.
"It was easy to do. You'd say, 'I want a forbearance,' and they'd give it to you. My loans were at 7% interest, so $90,000 became $166,000 very easily."
That's what happened to Charlotte, a 59-year-old, now-retired public school special education teacher and administrator living in the Midwest who asked that her real name not be used. Charlotte returned to graduate school in her late 20s to advance her career.
While pursuing two master's degrees and then a doctorate, she attended graduate school part-time for 12 years, racking up student loan debt of about $90,000.
After completing her studies, Charlotte began paying $800 a month toward her loan balance, but a chronic, life-threatening medical condition prompted her to put the loans into forbearance.
"My husband and I had four kids together, and I was making maybe $55,000 a year, so it was a big monthly obligation," she remembered. "Basically, it was easy to do. You'd say, 'I want a forbearance,' and they'd give it to you. And my loans were at 7% interest, so $90,000 became $166,000 very easily. In the end, I was paying about $1,200 a month."
Public Service Program Mess
Once she had worked for public schools for a total of 10 years, Charlotte qualified for the Public Service Loan Forgiveness Program. Created in 2007, it forgives student loans held by individuals working for government or nonprofit organizations earning modest wages after they make 10 years of on-time, monthly payments while working full-time.
"One day, about three months ago, they were forgiven, all $166,000,"
But the program is acknowledged as a bureaucratic, dysfunctional mess. For example, the earliest date public servants could qualify for full forgiveness of their loans was October 2017. Of the 28,000 who initially applied, only 96 were approved, a denial rate of 99%.
But in the wake of student loan repayment pauses spurred by the COVID 19 pandemic, the public service loan forgiveness program received new scrutiny. After extensive research, Charlotte became convinced that she qualified. She buttonholed an Education Department representative, who agreed and put forgiveness into motion. The official advised Charlotte to regularly check her loan balance online.
"One day, about three months ago, they were forgiven, all $166,000," she said. No longer faced with that monthly obligation means Charlotte doesn't have to return to part-time work just to repay her loans, and can concentrate on her health, which will involve an organ transplant later this year.
The Biden Administration earlier this summer announced additional changes to the plan that should make it even easier for qualified borrowers to receive relief.
What's Next?
Charlotte's and my loan forgiveness was part of a first wave of efforts the Biden Administration said it's committed to expanding. While the provision that led to my loan's forgiveness survived a court challenge in August, another initiative that would forgive loans held by students who attended predatory private institutions is still in legal limbo.
In total, the Biden Administration says it's approved nearly $117 billion in student loan forgiveness for more than 3.4 million borrowers, including through the programs that helped Charlotte and me, and others that provided relief to borrowers with permanent disabilities or were cheated by their schools.
The soaring costs of a higher education that increasingly is regarded as a requirement for career success and a broken student loan system has financially crippled millions of Americans. These public sector programs are likely only one piece of a solution needed to bolster financial security for all college students, young and older alike.
