What Is the risk to OASI benefits from unpaid student loans?

Abstract

While the magnitude of student debt held by those over 65 is not large, both the share of households holding such debt and the mean amount have risen rapidly since 1990. Defaults on student loans have similarly been rising among older debt holders. One distinct feature of federal student loans is that federal payments to individuals, including OASI benefits, can be withheld by Treasury to pay for delinquent loans. The rising trend in default rates, in combination with potential benefit offsets for borrowers, may undermine the economic security of retirees. Using the 2010-2019 Surveys of Consumer Finances, this paper estimates how much student debt is held by OASI beneficiaries, evaluates the financial consequences of loan delinquency, informs on future trends by examining future beneficiaries, and estimates the impact of the Biden administration's student debt relief plan.