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Student Loan Payments… into Retirement?

The cost of higher education is on everyone’s minds. The conversation tends to focus on young people who can incur massive amounts of debt in trying to keep up with the rising costs of a college degree. But a growing number of retirees, according to this Associated Press article posted on HigherEdJobs, are dealing with student loans as well, demonstrating that this is a problem that knows no age limits.

The number of seniors aged 65 to 74 with student debt was just 4% in 2010, but that is up from only 1% six years prior, and is sure to go up as the baby boomer generation continues into retirement. Though some of these loans are taken out for dependents, about 80% is for their own education, though it isn’t clear whether this debt was incurred early in life or later as returning or non-traditional students. About a quarter of these loans are in default and, in many cases, Social Security benefits are docked to pay off the debt. Let’s get this straight… Social Security funds meant for retirement are still paying off the educational loans of some 155,000 individuals. Yikes.

Rosemary Anderson, one senior struggling to pay off her debt, is quoted as saying, “I find it very ironic that I incurred this debt as a way to improve my life, and yet I still sit here today because the debt has become my undoing.” For me, this calls into question the oft repeated narrative that a good college education will pay off in higher earnings later in life. This is the case overall, but clearly, some people are not reaping the financial benefit of a higher education.

So what happens when you look deeper? A report on lifetime earnings as a function of degree achieved by Georgetown University, “The College Payoff,” indicates that, though degree level matters, other factors come into play. One can choose an occupation that pays far better with a lower earned degree level than an occupation chosen by someone with a high degree level. (Ask just about any of us here at this very blog with PhDs and moderate paying jobs!) On top of that, race/ethnicity and gender are more important factors in determining lifetime earnings than education or occupational choice. For example, the average woman needs to earn a PhD before she can achieve the salary of the average man with a bachelors degree, and African-Americans and Latinos with masters degrees, on average, don’t make more than their white counterparts with bachelors degrees, on average.

Earnings Overlap (Georgetown University): In a surprising number of cases, people with less educational attainment earn more than those with more education.  This graphic represents just how much earnings overlap there is, relative to the median lifetime earnings of workers with a Bachelor's degree ($2,868,000).

Earnings Overlap (Georgetown University): In a surprising number of cases, people with less educational attainment earn more than those with more education. This graphic represents just how much earnings overlap there is, relative to the median lifetime earnings of workers with a Bachelor’s degree ($2,868,000).

Could these discrepancies be why so many seniors are still stuck with student loan debt? It’s not clear at all from the reporting whether this is a factor, but this is an important point to keep in mind across all generations: a college degree is not automatically a ticket to a more stable financial future. A prospective student must take care to balance their career goals, educational aspirations, and financial reality now and many decades into their future. This is quite a task to ask of a typical 16 or 17 year-old, especially for those who may be first generation college students with little guidance from previous generations. The promise of a shiny new future comes with a significant price tag, and there is still no end in sight for the next generation of bright-eyed hopefuls that fill our campuses every year.

As I slowly whittle away at my own college debt, I look at my students and wonder how the system can continue to be sustainable in the future, and shudder to think how much harder they might have it just a few years down the road.

Featured Image CC Simon Cunningham on Flickr

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Nicole

Nicole

Nicole is an assistant professor of physics and astronomy at a small liberal arts college. Her home on the internet can be found at One Astronomer's Noise.

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