As the Trump administration intensifies efforts to collect on overdue student loans, a striking trend is emerging: older borrowers are increasingly struggling to keep up with their payments. According to the Federal Reserve Bank of New York, nearly 18% of student loan borrowers aged 50 and above were seriously delinquent—meaning 90 days or more late on payments—in Q2 2025. This is a dramatic rise from about 10% in 2019, signaling a growing financial strain on those approaching or in retirement.
For context, younger borrowers fare somewhat better with delinquency rates of 8% among 18-29-year-olds and 11% for those aged 30-39. But the sharp increase among older borrowers is particularly concerning. Lori Trawinski of AARP highlights the tough choices facing this demographic, who often juggle retirement savings, healthcare costs, and now mounting student debt.
Why is this happening? Experts suggest two main drivers. First, many older Americans took on debt to fund their children’s college education, overextending their financial capacity. Second, some returned to school later in life but didn’t realize the career or income gains they anticipated, leaving them with burdensome loans and limited repayment ability.
This trend has serious implications for investors and financial advisors alike. Older borrowers with delinquent loans may delay retirement, reduce spending, or tap into investment portfolios prematurely, potentially undermining long-term financial security. For advisors, this highlights the urgent need to incorporate student debt assessments into retirement planning and wealth management strategies.
What Investors and Advisors Should Do Differently Now
-
Prioritize Income-Driven Repayment Plans: As certified financial planner Douglas Boneparth stresses, exploring federal income-driven repayment (IDR) plans is critical. These plans adjust monthly payments based on income and family size, offering a lifeline to struggling borrowers. Advisors should proactively review clients’ eligibility for IDR plans, especially given recent policy changes phasing out other repayment options.
-
Act Before Default: Delinquency doesn’t equal default, but it’s a warning sign. Borrowers are considered in default after 270 days of missed payments federally (120 days for private loans). Advisors must encourage clients to act early—whether by adjusting repayment plans, requesting forbearance, or refinancing—to avoid severe credit damage and wage garnishment.
-
Plan for Wage Garnishment Risks: While Social Security benefits are currently protected from garnishment, this pause is temporary and unofficial. The Department of Education has resumed wage garnishment, which can claim up to 15% of disposable income. Advisors should prepare clients for this possibility, especially those still working, by stress-testing cash flows and budgeting for potential garnishments.
-
Incorporate Student Debt into Retirement Planning: A recent study from the National Institute on Retirement Security found that over 20% of older adults with student debt have delayed retirement. This is a crucial insight for advisors: student loans are no longer just a “young person’s problem.” Integrating debt management with retirement income strategies will be essential to help clients maintain financial independence.
What’s Next?
With the Biden administration’s student loan forgiveness programs largely stalled by legal challenges and the Trump administration’s aggressive collection resumption, the landscape remains uncertain. Investors and advisors should stay alert for policy shifts that could either ease or exacerbate repayment burdens.
One actionable step is to leverage the Education Department’s online tools to model different repayment scenarios at Studentaid.gov. This empowers borrowers to identify sustainable payment plans before falling deeper into delinquency.
Unique Insight: The Ripple Effect on Consumer Spending and Markets
An often-overlooked consequence of rising delinquency among older borrowers is its potential dampening effect on broader consumer spending. Older adults typically have higher disposable incomes and are key drivers in sectors like healthcare, travel, and luxury goods. As more of their income is diverted to debt repayment or garnishment, discretionary spending may contract, impacting market segments heavily reliant on this demographic.
For investors, this signals a need to reassess exposure to consumer discretionary sectors and consider opportunities in financial services firms that offer refinancing or debt management products tailored to older borrowers.
In conclusion, the surge in student loan delinquency among older Americans is reshaping the financial landscape in ways that demand immediate attention from investors and advisors. The key takeaway: act now to integrate student debt management into holistic financial planning, anticipate policy shifts, and prepare clients for the evolving realities of repayment and collection. Staying ahead of this trend is not just prudent—it’s essential for securing financial futures in an increasingly complex debt environment.
Source: Older student loan delinquencies reach 18% in Q2 2025