Good investment or not, student loan debt is creating ripples later in life – sometimes much later

Education debt is generally good debt and is a problem for students who are not doing well in college or not taking challenging courses or majors, said Wharton professor of business economics and public policy Kent Smetters, faculty director of the Penn Wharton Budget Model. Getting a communication degree today, for example, is less valuable than in the past unless you know modern technologies – for example, SEO – to help with obtaining a good job.

Still, if not all debt is created equal, neither are some of the payoffs. Women working full time were found to earn 25% less than men, the Georgetown study concluded, and, at the highest education levels, African Americans and Latinos could expect to earn close to a million dollars less than their white and Asian counterparts over a lifetime.

A 2014 U.S. General Accountability Office study of student debt for older Americans uncovered a surprising trend: Although it is a small number, a percentage of Americans age 65 and older are carrying student debt, and the number is growing. Households headed by 65- to 74-year-olds with student debt grew from about 1% in 2004 to 4% in 2010 Talbotton instant payday loans company. While those 65 and older account for a small fraction of the total amount of outstanding federal student debt, the outstanding federal student debt for this age group grew from about $2.8 billion in 2005 to about $18.2 billion in 2013, the GAO found.

It doesn’t have to be this way. A lot of advanced industrialized countries manage to provide education for their citizens without inflicting this long-term debt burden on young people. Christopher Peterson

In a new, as-yet unpublished study, Wharton business economics and public policy professor Olivia S. Mitchell and her coauthors tallied data on people ages 55-64 who responded to the 2009 National Financial Capability Survey (NFCS) and found that among this group on the verge of retirement, 15% had a student loan for themselves or their partners, children, grandchildren, or others. Of those who held these student loans, over half (56%) had not tried to figure out their monthly payments, one fifth (20%) didn’t know whether their payments depended on their income or not, and 44% were concerned about their ability to pay off these student loans.

Over half of the respondents with student loans said they would have handled their finances differently if they had the opportunity to do it over again, said Mitchell, executive director of the Pension Research Council.

Mitchell and her colleagues also examined survey respondents to the next NFCS – in 2015 – from people age 56-61, and found that 6% of this age group reported still having student loans for their own education

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The student loan debt burden varied substantially by income: 11% of those with under $35,000 in household income had student loans, compared to only 2% of those making $75,000 or above. Moreover, the student loan debt burden was also higher for African-Americans, with 17% reporting owning student loans, versus 5% for whites.

One poignant statistic from the GAO: In 2014, 3% of Social Security recipients had their benefits checks garnished for student loan repayments

Some other countries have devised creative ways of handling repayment of debt. Australia has a system that links the repayment of loans with the tax system. Income-driven repayment options have been created in the U.S., said Perna, but these options are more cumbersome and administratively complex than in Australia and some other nations. By linking the amount of the monthly payment to an individual’s income, income-driven repayment options can help to protect borrowers against the risk of non-repayment. But a more seamless system wouldn’t require borrowers to annually report their income to the U.S. Department of Education.