For many Americans, student loans are not just a debt from the past. They're making it impossible to save for the future.
In particular, new research shows that student debt has become a major obstacle to retirement savings. According to a
"The sad takeaway is that it wasn't all that surprising," said Andrew Housser, co-founder of Achieve. "We've seen the stress that debt in general has put on consumers for 20 years, and the ballooning of student loan debt in particular."
This finding dovetails with other research. A
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Many financial advisers are all too familiar with this drag on their clients' nest eggs.
"This is increasingly common," said Melissa Cox, a certified financial planner at
That debt is also standing in the way of other savings goals. The Achieve study, which surveyed 1,000 U.S. adults, found that 26% of borrowers had not paid off other debts, 23% were unable to buy a house and 17% couldn't buy or lease a car — all "as a direct result of their student loan debt."
"Any sort of life goal that has a financial component is being impacted by student loan debt," Housser said.
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Until recently, borrowers benefited from a COVID-era pause on federal student loan payments. But
As those bills loom, many borrowers are expecting the worst. Almost half of Achieve's respondents — 45% — said they feel stressed about restarting their loan payments, and 28% said they'll have to take out additional debt to make ends meet.
"The forbearance that happened during the pandemic was a welcome relief," Housser said. "But our position all along was that that was sort of a Band-Aid, which was not solving the underlying problem."
That underlying problem, Housser said, is that the cost of higher education has skyrocketed. For the 2023-2024 school year, the average tuition at a private college is $39,723 — up 4% from last year, according to the
These costs, and the resulting debt, have grown so large that many Americans are beginning to doubt whether college is worth the price. A
There's not much the average borrower can do about the cost of education. But there are things they can do to manage both their debt and their retirement savings — and financial advisors can help them.
Eric Roberge, founder of the RIA
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"If you currently have student loans, you can pay those down and still get a matching contribution to your retirement plan from your employer," Roberge said. "You can tell your employer you are using the money you otherwise would contribute to an employer-sponsored retirement plan like a 401(k) to pay down your loans — and your employer will still provide their normal matching contribution into your 401(k)."
Other policies could help as well, if advisors alert their clients to them. After the Supreme Court struck down President Joe Biden's student loan forgiveness program, his administration launched
One is the "on-ramp," a 12-month period during which debt holders who miss payments are not considered delinquent. Another is the SAVE plan, an income-driven repayment plan that allows borrowers to pay just 5% of their income per month.
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"Anyone who has a considerable amount of student loan debt should enroll in the new SAVE plan," said Jay Zigmont, founder of
But until the underlying cause of this debt is addressed, Housser said, the national problem of student debt is not going away.
"The cost of education continues to outpace inflation by a long shot," Housser said. "The whole system is set up to break badly at some point."
