Pay Now or Save for Later: How Student Loan Borrowers Age 50 and over Perceive and Plan for the Future

Background and Purpose: Retirement savings can be dramatically affected by unanticipated economic shocks, the most recent of which may come in the form of student loan debt. In the United States, over 44 million people carry student loan debt, a growing percentage of whom are age 50 and above. Though older adults hold a small portion of federal student loans when compared with members of younger age cohorts, they default on loans at a higher rate. Emerging research demonstrates that student loan borrowers may take longer to accumulate and save wealth, resulting in lower net worth and retirement savings.

Expanding on previous research, MIT AgeLab conducted a mixed methods study with student loan borrowers between the ages of 25 and 75 with the goal of exploring how student loan borrowers experience and manage their student loans within family systems and perceive and prioritize retirement and longevity-planning in light of their student loans. Questions guiding the research included: How does carrying education debt impact borrowers’ decisions about spending and saving? How do borrowers make, negotiate, and experience decisions about student loans within their family system? And how do borrowers perceive and make decisions about retirement and longevity-planning in light of their student loans? This presentation will share findings from older borrowers.

Methods: This research was guided by a concurrent triangulation mixed method study design that included data from focus groups and surveys (n=100). Surveys focused on borrowers’ experiences carrying student loans and how these experiences influence their spending and saving priorities, relationships with family members and their attitudes and behaviors surrounding saving for retirement. Focus groups explored how borrowers perceive and plan for the future based on their education debt, how their debt manifests within family systems, the impact of other types of debt and financial constraints that borrowers may carry, and trusted sources of advice. After coding using Sandelowski’s qualitative description approach, qualitative data was merged with quantitative data.

Results: Findings suggest that for older borrowers, student loans are generally one of several financial constraints that can inform spending and saving decisions. Depending on the person for whom the loans were taken (either the older adult, a child/grandchild, spouse, or combination thereof), student loans are regarded as more of a catalyst or as more of a constraint to overall financial wellbeing. For most, student loan payments are regarded as stunting overall retirement savings and for others, the two are regarded as separate. Older borrowers weigh considerations about student loan payments with saving for retirement differently according to their planning horizons.

Conclusions and Implications: Results of this mixed methods study will inform the creation of a national survey of student loan borrowers conducted by the MIT AgeLab. Spotlighting student loan debt as a potentially new type of economic shock to retirement savings, this research seeks to inform scholars’ and policymakers’ understandings of how to financially prepare individuals and families for longer lives continuously throughout the life course.