A total of 700,000 Americans aged 65 and above were in default by of their student loans by 2013 according to the U.S. Government Accountability Office report released on September 10, 2014. The default by the baby boomers amounts to $18 million representing 16% of the total student loan debt of $1.2 trillion. According to GAO student loans held by borrowers aged between 25 and 49 years amounts to 12%, which is lower compared to the 16% of the baby boomers. According to the FED, about 2 million Americans aged 60 and above owe $36 million in student default loans. The other problem is that the baby boomers have more problems repaying the loans and most them are in default compared to the 25-49 age bracket. According to Stratford (2014), the default rates for those aged above 75 is much higher at over 50%. The effect is that retirees have income below poverty threshold owing to the high student loan default rates depicted from these statistics. Siedel (2013) provides a summative statement of the problem of baby boomers having high student default rates. “At some point, lack of savings, lack of employment possibilities and failing health will catch up with the overwhelming majority of the nation’s elders. Let me emphasize that we’re talking about the overwhelming majority, not a small percentage who arguably made bad decisions throughout their working lives” (Siedel 2013).
Several reasons could have led to the high student default rate among the baby boomers including the Glass-Steagall Act, which was in effect during the 1970’s when baby boomers were graduating from college. The effect was that baby boomers banked their money and applied for mortgages from Savings, Loans, and Private banking institutions. There was capping of interest rates and strict regulation on the rise and fall of interest rates with Regulation Q being in effect during the time. Signing of the Depository Institutions