Association for Public Policy Analysis & Management

In this study, we investigate the trends and implications of student debt held by seniors and more broadly, older individuals. An important, but underappreciated, aspect of the well-documented rise in student loans in the United States is the amount of debt held by older individuals. The number of Americans over the age of 60 holding student loan debt has quadrupled in the past decade, while the average student debt held nearly doubled. We first establish a series of stylized facts using nationally representative credit profile data from the New York Federal Reserve Bank/Equifax Consumer Credit Panel (CCP), which includes longitudinal (quarterly) records of a random sample of U.S. individuals with a credit bureau record. Our analysis indicates two debt trends with important, but distinct, consequences for the financial health of older Americans, as well as intergenerational economic mobility. First, debtors are holding their student loan debt for longer, which has implications for repayment and debt relief policies. Second, there is a growing and substantial number of debtors who newly hold student loan debt later in life, likely driven in large part by older individuals taking on student loan obligations for the educational expenses of children or grandchildren. We next assess the causal impacts of increasing student debt on the outcomes of older adults, including measures of credit health (e.g., whether the debtor declares bankruptcy) and utilization (e.g., whether the debtor changes demand for other financial products like credit card debt or home equity lines). Specifically, we use state-level changes in public college tuition interacted with the timing of changes to federal programs that affect parent borrowing, as instruments for student debt. To our knowledge, this study will be the most comprehensive analysis of student loan debt held by older Americans to date, and the first causal analysis of the effect of student loan debt on the financial health of seniors. Findings from the study will improve our understanding of the nature of debt help by older Americans and will inform policies related to the financial and economic challenges seniors face, and more broadly, prospects for financial resilience among individuals as they age. This study also has important implications for understanding the returns to postsecondary education and its potential to help individuals move into and out of the middle class, taking a longer view of the life cycle than in many prior studies.