With the suspension of student loan payments coming to an end, it’s not just millennials preparing to see an increase to their monthly expenses.
Fact Checked byTaylor Hegna, CFP®
With the suspension of student loan payments coming to an end, it’s not just millennials preparing to see an increase to their monthly expenses. More than ever before, people are exiting their working careers but still paying the bill for the education that got them there. Others are carrying the weight of their children's education into retirement with them.
At the end of June 2021 the student loan debt total for the U.S. was at $1.73 trillion.1 The amount of student debt being carried by those over the age of 50 may come as a sticker shock. In the past fifteen years the amount has gone from $47 billion to $289.5 billion!2 That’s just over $16 billion per year on average!
You may be wondering how is that even possible, but with the rate of college tuition increasing by an average of 9% per year for the last 20 years3, that number begins to add up.. The average annual cost of a 4 year college in the year 2000 was $3,349 and that number now sits at approximately $9,349 per year.4
For many individuals who are supposed to be maximizing their retirement accounts in their peak earning years, those dollars are being redirected to pay off outstanding debt. Many people may find themselves working longer than anticipated to try and enter retirement without the debt load. Now, unlike years past, financial planners are working out strategies to compensate for ongoing payments that may continue throughout retirement for many people.
While the government has offered potential loan forgiveness for millennials being crushed by the weight of their education, not much has been mentioned for the retiree. Currently, there are no specific loan forgiveness programs for senior citizens. But, they can apply for the same Public Service Loan Forgiveness programs as everyone else. Many have argued that our government should take note of the UK stance on student loan forgiveness which initiates after 30 years from your first payment. Meaning that you must pay for at least 30 years but, after that, they call it even.5
While it may not be possible to get your student loan debt erased, you can still be strategic about repayment as your income changes as you move into retirement. Consider adjusting your payments with income-driven repayment plans. These plans can help decrease your payment based on your income change as you shift out of your working career. However, remember that every 12 months there is a recertification process to update your repayment.
Sometimes focusing on the overwhelming balance of student loans can be stressful but it can be accounted for in your financial planning. Make sure you understand how it impacts your future so you aren’t stressing about something that may not be a factor that influences your aspirations!