20% of American Families Still Owe Student Debt. The Typical Balance Is $25,600

Many retirees still have a student loan payment in their monthly budget. It sits right next to the Medicare Part B premium, which is $202.90 a month in 2026. Sometimes the loan is the retiree’s own, but just as often it’s one they took out so a son or daughter could finish a degree.

Here is who still owes student debt, and how much, as the Federal Reserve’s Survey of Consumer Finances shows that 20% of American families had student debt in 2025. That’s down 2 percentage points from 2022. Among families who still owe, the typical balance is $25,600.

Why the Typical Balance Tells More Than the Average

The Fed reports two numbers, and they point in different directions. The median balance, $25,600, reflects the middle: half owe more, half owe less. The mean, or simple average, is $43,000. A smaller group with big balances from law school, medical school, or graduate degrees pulls the average up. The median barely moves when a few huge balances show up, so it’s the better picture of a normal borrower.

Both numbers fell between 2022 and 2025. The median dropped 5%, and the mean dropped 16%. When the average falls faster than the median, it usually means the biggest balances shrank the most, and families in the middle saw only a small change.

Debt Is Shifting Toward Families With Less Room to Pay

Student debt has always tended to concentrate among higher earners. They borrow more for school, and they usually have the income to pay it back. In 2025, the top two income quintiles held 55% of outstanding student debt, per the Fed. The top fifth’s share alone slipped from 30% to 25% since 2001.

The Fed says this drift toward families with less financial capacity points to more repayment risk. Put simply, more of what’s still owed sits with households that have a thinner cushion. For people near retirement, that cushion gets even thinner once the paychecks stop. Student debt isn’t broken out by age of the family head in the survey, so it can’t say exactly how many retirees are in this group.

What a Default Can Cost on a Fixed Income

When a federal student loan goes into default, the government can collect from money it already sends out. The IRS’s Form 1040 instructions say a tax refund can be offset to cover past-due federal debts such as student loans. Social Security can be reduced too, by up to 15% of the monthly benefit, though the check can’t be cut below $750.

On a fixed income, that’s a lot of money. The average retired worker’s benefit is estimated at $2,170 a month after the 2027 cost-of-living increase. Collections have started and stopped more than once. In January 2026, the Education Department delayed forced collections. It was rolling out new repayment rules and didn’t say when that delay would end. So the rules allow offsets, but the timing keeps changing.

Federal loans also don’t pass to family members. If the borrower dies, relatives can tell the servicer and the loan is canceled, according to the Consumer Financial Protection Bureau. Private loans work differently, and a co-signer can be left holding the debt. Our look at a grandfather co-signing his grandson’s loan shows how that plays out.

Repayment Rules Changed This Year

Income-driven repayment sets the monthly bill based on income instead of the loan balance. The rules shifted on July 1, 2026, when a new plan called the Repayment Assistance Plan, or RAP, opened to eligible federal borrowers, excluding Parent PLUS loans. It charges a share of income and cancels whatever’s left after 30 years. The SAVE plan is ending, and the PAYE and ICR plans are set to close in July 2028. Income-Based Repayment continues.

Consolidation means rolling several federal loans into one new loan, and it now comes with a catch. From July 1, 2026, consolidation triggers a new track. That track has only two choices: RAP or a new Tiered Standard Plan, but Parent PLUS borrowers are limited to the Tiered Standard Plan. Parents who borrowed for a child’s education are affected too, and their options are narrower, so consolidating without checking first could close doors that are hard to reopen.

One Phone Call Worth Making Before Retirement

Most American families don’t carry student debt at all. The ones who do owe a little less than they did three years ago. Still, for the 20% who owe, the rules have changed too often to trust old paperwork. Call the loan servicer. Ask which plan the loan is in, what the monthly payment will be under the new rules, and the exact payoff date. If that date falls well after retirement starts, it’s the number to plan around.

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