Why more parents and professionals owe on student loans

It’s widely recognized that the country is facing a student loan debt problem. In fact, student borrowers owed more than $1.6 trillion in loans in 2019, according to the Federal Reserve.

But less is known about the composition of who owes the debt. Typically, the idea of getting money to go to college brings to mind a younger crowd set. Sorting through the numbers of the last decade indicates a good portion of the challenge is being shouldered by older people and those seeking post-graduate, professional degrees.

For instance:

• Americans age 60 and older were the fastest-growing age segment of the student loan market between 2004 and 2015.¹
• The number of those older student loan borrowers quadrupled from 700,000 in 2005 to 2.8 million in 2017.²
• On average, graduate and professional degree students borrow more than three times as much as undergraduate students each year.³

What does that mean on a practical level?

Older borrowers

The age increase in student loan borrowing is being fed in large part by parents and grandparents supporting the education of their children and grandchildren, according to a 2017 analysis by the Consumer Financial Protection Bureau using 2014–15 data. Indeed, the Bureau found that 73 percent of student loan borrowers age 60 and older said that they needed the money to educate their offspring.²

At the same time, the analysis found:

• The average debt load of such 60-and-older borrowers increased to $23,500 in 2015 from $12,100 in 2005.
• Older student loan borrowers typically also owe on other types of debt, like a mortgage (63 percent), consumer credit (67 percent), and an auto loan (45 percent).
• Late and missed payments by older borrowers have increased since 2005. The proportion of delinquent student loan debt held by borrowers age 60 and older increased to 12.5 percent in 2012 from 7.4 percent in 2005.

More grad students

At the same time, more students are striving for advanced degrees. Total graduate school enrollment increased by 39 percent between 2000 and 2017, according to the National Center for Education Statistics. The number of master’s degrees conferred grew by 73 percent and doctoral degrees by 54 percent from 2001 to 2017, the Center reported.⁴

As a result, graduate students are accounting for more of the nation’s debt load. According to one analysis, 51 percent of the overall student debt load in 2016 ($1.3 trillion) was held by households with at least one advanced degree.⁵

But that debt isn’t evenly distributed. According to one survey, the average U.S. household with student debt owes $47,671, but that figure is significantly higher for those with graduate degrees: $71,000 (or $82,800 if you include the likely debt remaining from getting an undergraduate degree).⁶

For specific professional degrees, the average debt load tends to be higher still, according to professional associations:

• Dental school graduates have an average debt of $292,169.
• Medical school graduates owe an average of $196,520.
• The average debt owed by a newly minted pharmacist was $166,528.
• A graduating law student will owe an average $145,500.
• An MBA candidate will have $66,300 in debt on average at graduation.

Indeed, professional degree recipients tend to be the most indebted group, according to the Urban Institute, with 56 percent having borrowed $100,000 or more to complete their studies, compared with only 10 percent of advanced-degree students overall.³

Of course, such professional degrees typically command higher incomes and so, assumedly, more wherewithal to repay student loans. But that isn’t always the case. Professional incomes can vary widely by geographic location and specialty market. That leads to some scenarios where the income can’t offset growing interest on the loan.

Conclusion

Older borrowers and those with professional degrees are shouldering larger student debt loads than ever before. And a portion of them are already facing strains in paying those loans back.

What can be done?

There is a range of options. Recent moves by the federal government in response to the pandemic may offer relief for some types of student loan debt. Additionally, low interest rates may open the door to refinancing opportunities for some debt holders. 

Many seek out help to sort through such refinancing options. At the end of 2019, MassMutual’s financial professionals had held more than 1,000 conversations with clients or prospects to help them manage their student debt, resulting in more than $25 million in refinanced student loans.

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