Abstract
The individualized responsibility of student loan repayments impacts the retirement security of older Americans with education debt. Our mixed methods study combines quantitative analysis of large-scale datasets and detailed interviews to understand how older Americans navigate debt obligations and retirement needs. Early findings indicate that conventional assumptions of human capital theory and loan repayment may not apply to older borrowers who have a complex experience of debt and retirement. This has important implications for policy interventions.
Key Words
student Loans, retirement, debt relief, mixed methods, Social Security
Student loans are primarily considered an issue for younger Americans, yet millions of adults approaching or already in retirement have education debt (Manickam, 2024) taken on to help fund university education, either for themselves or their children. But an unintended potential consequence of this debt is its impact on retirement security. The American retirement system is heavily individualized, relying upon voluntary individual private savings and Social Security benefits (Manickam & Ghilarducci, 2024). Our ongoing research seeks to understand the ways in which having to pay off student loans affects older borrowers’ ability to navigate these two pillars of the retirement system. This article discusses how student debt and retirement may be linked, how a mixed-methods analysis can overcome existing limitations in the economic analysis of debt and retirement, and themes emerging from our ongoing interviews. It ends by pointing out policy responses that address debt among older Americans from a systemic, not an individual, lens.
How Student Loans May Affect Retirement
The need to understand how education debt and retirement are linked comes from issues with the fundamental assumptions tied to both institutions.
In human capital theory, individual upskilling through higher education leads to higher wages (Leoni, 2025); thus, student loans are justified as an investment with a return in the form of better salaries and jobs. These may be loans taken out for borrowers (i.e., direct or Graduate PLUS loans) or their children (Parent PLUS loans). The problem is that the return used to repay the debt is also the source of their retirement contributions. This circumstance occurs within a complex environment in which said return may or may not materialize. Additionally, there are tradeoffs and decisions involved in the dual concerns of preparing for retirement while paying off debt.
Student debt may restrict the ability of borrowers to prepare for retirement in several ways: Some people may prioritize paying down debt rather than contributing to retirement accounts; others may delay retirement to buy more time to repay debt; or, conversely, they may seek to claim Social Security benefits early, despite losing potential benefits, to increase income.
These concerns are not reflected in the traditional assumptions of human capital theory. While student loans have been subject to intense scrutiny regarding sustainability (Barr, 2014; Lochner & Monge-Naranjo, 2015), as well as the disparity of their impact across different groups (Britton et al., 2019; Thiem & Dasgupta, 2022), this scrutiny has been focused on student loans to younger borrowers. There is relatively little literature in the discipline of economics that analyses student loans in relationship to retirement.
A lack of datasets presents a major challenge to analyzing the two institutions of debt and retirement together using only quantitative methods. Most datasets with information on debt and retirement are not longitudinal (i.e., they do not track changes over time), do not simultaneously ask questions relevant to retirement and debt, or don’t disaggregate types of debt. These surveys also are not designed to understand how people think about retirement and debt together.
‘The notion that this debt was a personal responsibility and not the outcome of a system designed to fail them was strong.’
The complex nature of the relationship between debt and retirement requires a combination of methodological approaches including quantitative analysis of large-scale datasets like the Survey of Consumer Finance, and in-depth interviews with borrowers to understand how people think about these two concepts.
This mixed-methods approach must then be compared to traditional economic literature assumptions. These interviews are particularly useful for understanding how existing policies addressing issues regarding debt and retirement are experienced by the people for which they are intended. Qualitative data can be useful when thinking about which policy responses are most critical to addressing debt among older Americans.
Emergent themes from the Interviews
Several themes emerged after 15 interviews, which speak to the complexity of the relationship between debt and retirement and highlight the need to think more seriously about education debt as a growing problem for retirement-age Americans. Some themes include:
1. Internalized individualization of student debt: Participants in our interviews repeatedly affirmed they felt the debt was a personal responsibility, reflecting a strong internalization of the idea that student loans were an individualized and not a systemic problem. The notion that this debt was a personal responsibility and not the outcome of a system designed to fail them was strong. Alanna (name changed for confidentiality), who returned to work partly out of a need to repay Parent PLUS loans, said, “I know I have to do what I have to do.”
2. Fatalism and resignation: Despite a broad theme of individual responsibility, also present was the repeated narrative of fatalism regarding how to manage it. The large size of the debt owed, the inevitability of the rigid repayment schedule, and the difficulty of finding income to cover payments seemed to result in a resignation about loan repayment. Devon, who works for a major Northeastern city and is approaching retirement, said, “What’s the worst that can happen to me? We know that your student loan dies with you.” This idea was echoed by Stephen who, despite being a high earner, said, “the sense of carrying this kind of debt makes people think of really unhealthy things, like [dying].”
3. Mixed feelings on retirement preparedness: Interviewees shared a wide range of responses to questions on retirement preparedness, especially when asked how they intend to manage student debt during retirement. Devon reflected a strong sense of confidence in his retirement planning, and he intends to work until the full retirement age of 70 to receive his full Social Security benefits. In addition to this, he has a city benefit plan. However, he has not accounted for how and whether he expects to pay off his student loans. Lan has filed to claim Social Security early, while continuing to work and receiving a small pension from an earlier nursing job. However, she hasn’t been paying back her student loan due to the pandemic-related loan forbearance that paused repayment requirements, and she is unsure how to proceed. Devon’s and Lan’s loans remain an added complication to their retirement plans that is difficult to manage.
The Need for a Collective Response to Debt
The narratives that emerge from these interviews complicate the traditional understanding of how education debt can be managed. Despite being institutions that affect people widely, both student debt and retirement security are treated as individualized problems. There is thus a need to move away from treating these as individual problems and instead to think of student debt and retirement insecurity as systemic social issues. This can be reflected through policy reforms that look beyond individual responsibility to wider systemic change. These reforms may include:
1. Loan forgiveness: Loan forgiveness remains the most direct method of addressing the problem of debt for older Americans, enabling them to redirect loan repayments toward retirement savings contributions instead. The contemporary Public Student Loan Forgiveness (PSLF) program originated from the bipartisan College Cost Reduction and Access Act (2007), which established terms under which student loans could be forgiven for public service. Attempts to expand student loan forgiveness during the Biden Administration, such as the Saving on a Valuable Education (SAVE) plan have been halted through successive court challenges. Our interviews suggest that uncertainty and lack of clarity on the future of loan forgiveness contribute to issues of resignation and fatalism regarding what near-retirees can expect when dealing with their debt.
Permanently stopping Social Security garnishments can help relieve the fear of having to repay them, and protect a heavily relied upon portion of retirement income.
2. Income-based repayments: Income-based repayment plans allow borrowers to pay a proportion of their monthly income rather than a fixed monthly amount. This change can ensure that older retirees are not repaying their loans at the expense of preventing them from saving for retirement or taking care of other retirement needs and thus allows for greater flexibility in retirement planning. Income-based repayment plans were first introduced in 1993 at the federal level through Congress with limited uptake and later expanded upon with relatively higher uptake throughout the 2000s (Baum & Delisle, 2022). The SAVE plan sought to aggressively expand income-based repayment options and introduce more forgiving repayment terms; however, these provisions have also seen court challenges.
3. Ending Social Security Garnishment: The present system allows for Social Security benefits to be garnished to repay defaulted federal student loans through the Treasury Offset Program. As loan forbearance ends, there is fear about whether beneficiaries can expect garnishments to resume. Permanently stopping garnishments can help relieve that fear and protect a portion of retirement income that is heavily relied upon. In March 2024 an open letter by some Congressmembers and Senators called on the Social Security Administration to halt the Social Security garnishment (Office of Congresswoman Ayanna Pressley, 2024); however, the Social Security Administration in 2025 resumed the collection of debts referred to the Treasury before March 2020 (Social Security Administration, 2025).
There is an urgent need to understand student debt and retirement security as both linked and systemic issues, because one shouldn’t have to choose between an accessible education and a dignified retirement.
Karthik Manickam is a doctoral candidate in Economics at The New School and a Doctoral Fellow with the Schwartz Center for Economic Policy analysis. Erin Simmons is a doctoral candidate in Anthropology at The New School and a qualitative researcher with the Schwartz Center for Economic Policy Analysis.
Photo credit: Shutterstock/simona pilolla 2
References:
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Office of Congresswoman Ayanna Pressley (2024, March 20). Pressley, Warren, lawmakers call on Biden Administration to stop taking Social Security benefits to pay defaulted student loans [Press Release]. https://pressley.house.gov/2024/03/20/pressley-warren-lawmakers-call-on-biden-administration-to-stop-taking-social-security-benefits-to-pay-defaulted-student-loans/
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