Student Loan Debt and Your Retirement

Student loan debt continues to rise, nearing $1.6 Trillion, forcing Americans to delay saving for retirement.

According to research conducted by the MIT AgeLab and published by the Teachers Insurance and Annuity Association of America-College Retirement Equities Fund (“TIAA”), 84 percent of Americans report that student loan debt negatively impacted their ability to save for retirement.  In fact, almost 75% delayed maximizing retirement savings to focus on student loan debt repayment.  And, 26 percent indicate they aren’t saving for retirement at all.

According to Roger Ferguson, Jr., the TIAA President:

 “To be sure, getting a college degree remains one of the smartest investments a person can make in their financial future — but saving for retirement is equally important.”

According to the survey, borrowers are prioritizing repayment of student debt and will focus on saving for retirement once the debt has been repaid.  Of more concern, 43 percent of parents and grandparents incurring debt on behalf of their children and grandchildren will focus on retirement after the student loan debt has been paid.

Based on the repayment plans available to graduates, repayment can span quite a period of time.  Moreover, when combined with other debt, such as mortgages, auto loans credit card balances, medical bills, etc., the delay in saving for retirement can have a disastrous effect.  In fact, Americans may lose hope in ever retiring at all.

What if there was a better way, a way to repay your debt and save for retirement at the same time, a way that won’t compromise lifestyle?  Would that be of interest to you?

If so, we await your call or email.  We can be reached at (317) 536-1391 or john.baird@collegeplanningstrategiestoday.com.

Student Loan Debt – A Taboo Topic

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For most Americans, religion and politics are taboo when it comes to topics of conversation.  Likewise, it seems, is the subject of student debt.  So much so that Americans may dive into the formerly taboo topics referenced above.

According to a Harris Poll of more than 1,000 adults, the topic of student loan debt is the greatest financially taboo topic at this time.  A similar TIAA-sponsored survey found that 40% of those responding reported never talking to their family about their student loans.  Over half indicated their families know nothing or very little about that debt.

Americans suffer under more than $1.5 Trillion in student loan debt, with one in four carrying a balance.  In fact, the amount and effect have been widely studied.

The Fed found that this debt directly impacted the 20% decline in home ownership among millennials (age 24-32).  In fact, student loan debt has been found to delay other major life events.

So, why is the topic taboo?

In the end, it’s debt.  It’s an uncomfortable topic.  And, people fear others will pass judgment.

Whether you’re nearing, starting, or in the midst of your college planning campaign, it’s highly likely that loans, both student and parent, will be one of the means by which the cost of attendance will be funded.  A properly-designed plan for implementing and repaying such loans should be a high priority.

Student and parent loans is one area in which we can provide guidance.  We look forward to assisting your family with its college planning campaign.

“Surprise” Study Findings: Concerns about Cost Means Parents & Students Should Start Planning Earlier

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It’s not really a surprise.  Almost without exception, every student and family engaging our services regret not beginning their college planning campaigns much earlier than they did.  They all wish they’d spent more time.  

A national survey for Citizens Financial Group (“Citizens Survey”) showed that 63 percent of parents and 60 percent of students wished they had looked at college finance options earlier.  A Discover Student Loan survey (“Discover Survey”) found that 65 percent of parents are worried about having enough money to help cover college expenses.  In fact, only 41 percent plan of parents plan to use savings to pay for the education, with just 28% indicating they’ll manage to cover the entire cost.

The majority of our clients engage our services during the 11th or 12th grade years.  While we can and often do assist them with their planning, providing structure and peace of mind, our strategies have the greatest impact for families with students in 7th through 10th grade.  If families engage our services earlier than 7th grade, our strategies have an even greater impact.

The irony for most families is that the parents know that massive freight train most likely is headed their way from the day their child is born and they still wait much too long to plan properly.  And those who do take steps to plan, who try to properly prepare, unknowingly take steps that can have a negative impact on funding, specifically on prospective financial aid.

College degrees can change lives.  It’s well-accepted that those who earn a bachelor’s degree will earn at least $1 Million more during a typical working career than those who earn only a high school degree.  Of course, the degree should be earned in a field with prospects for well-paying employment.

The Citizens Survey revealed that 30 percent of parents first discussed the expense of college when their children were in 8th grade or earlier, 53 percent prior to end of freshman year in high school.  It further revealed that 44 percent of parents began saving for college before the 11th birthday, 38 percent had saved nothing.

When should parents begin saving?  At conception!  Realistically, as early as possible.  But, be sure to place that savings in the right vehicle.  And, the right vehicle for a family may not be a 529 Plan.

If you have one or more children to put through school, then you must begin saving early on in their existence, the earlier the better.  But, you must save efficiently, using the vehicle(s) that will keep that savings safe and secure.  Otherwise, you and your children may end up burdened by debt.

Start your college planning campaign now!  We look forward to hearing from you.