Student Debt Putting Retirement Planning on Hold?

Near-retirees and mid-career workers feeling similar stress as recent college grads

There’s no doubt that the rising cost of college is putting lots of financial stress on American workers. Frequently, the cost of a 4-year private university is more than the average cost of a home in most areas of the country. Here is a snapshot of the student-loan landscape, along with some suggestions for what to do if you’re feeling the pinch.

Student debt by the numbers

Student loan debt in the U.S. now totals $1.56 trillion.1 This drag on household finances can not only delay plans to get married, have children, or buy a house, but also defer retirement savings, which is by far the largest single expense you will have to fund. Did you know that:

  • The average student in the class of 2017 has $28,650 in outstanding student loans;2 and the average loan payment for borrowers age 20 to 30 is $351/month.3
  • Notably, roughly 8 million Americans age 50 and above owe $20,000 more than new graduates and are still paying off loans.4
  • Women shoulder almost two-thirds of outstanding student loans — about $929 billion — even though they account for just 57% of students enrolled in colleges and universities.5

Options for managing student loan debt

The rules governing how private student loans are repaid are some of the strictest around. Younger borrowers often do nothave any credit history, and lenders, who are mindful of the added risk of lending to borrowers with no track record, can make it difficult to restructure a loan repayment plan. Still, here are some available options:

Loan consolidation — If you are carrying high balances on your student loans, car loans, or credit cards, it may be more cost effective to put all of your outstanding debt under one consolidated payment plan with a single lender. Generally, this is a viable option if you have a steady employment history, reliable monthly income, and a strong history of making payments on time.

Graduated payment plans — Some federal student loan options let you pay less in the beginning of the term, and then pay more later. Graduated plans usually are limited to 10 years, unless you opt for loan consolidation.

Extended repayment plans — These plans let you lengthen your repayment timeline for up to 25 years, securing a lower monthly payment in the process. You’ll ultimately pay more on your loans for a longer time period, but your monthly savings can be significant.

Private-loan company refinancing — Private student loan companies could be a viable option if you have a good credit ratings. But you may lose some of the borrower protections that come with federally guaranteed loans.

Government student-loan programs generally offer more protection options and flexibility than those offered by private lenders.

1 Federal Reserve Bank of New York’s Quarterly Report of Household Debt and Credit Data, Q4 2018.   2 Institute for College Access and Success.– man/2019/02/25/student-loan-debt-statistics-2019/#4e092362133f .  3 Walters Kluwer, “Student Loan Repayments,” Presentation, June 2019.  4, “Making Sense of Student Loans,” Presentation, June 2019.  5 “Deeper in Debt: Women and Student Loans,” American Association of University Women, May 2019.