Student Loans Haunt Many Boomers in Retirement

Many workers now want their employer to help them with student loan repayments, as 74% of all Americans carry this debt.

Student loan debt is becoming more and more prevalent in the U.S., and as a result, many Baby Boomers are carrying this debt into retirement, and many members of Generation X are on track to do the same, IonTuition found in a survey of 909 people over the age of 35. Today, 44 million Americans are carrying over $1.3 trillion in student loan debt—and 70% of students graduate from college with student loan debt averaging $37,172. Forty-four percent of Millennials carry student loan debt, while 26% of Gen X and 13% of Boomers do so.

Overall, 74% of the people IonTuition surveyed are still paying student loans, and 54% think their payments are too high. Sixty-one percent of Gen X folk say they are having difficulty paying back the loans, while this is true for 30% of Boomers.

The reason why student loan debt is so prevalent, according to IonTuition, is because of the reauthorization of the Higher Education Act in the 1990s, which qualified all Americans for student loans, regardless of income. In addition, the law permits borrowers to repay the loans over 30 years, rather than, saddling them with monthly payments that average $300 or more for decades.

Furthermore, many older Americans are co-signing for their children’s student loans, as well as housing them once they graduate and paying for some of their expenses, such as cellphone and car payments.

There is a direct link between student loan debt and the fact that many older Americansare delaying retirement, according to IonTuition. People who have no student loans have a median retirement savings balance of $56,000, but it is only $31,000 for those with loans.

IonTuition warns retirees with student loans they cannot pay that their Social Security benefit can be garnished to pay the loans back. In fact, in 2015, $171 million of Social Security payments were garnished to do just this. The Government Accountability Office (GAO) recently reported that in fiscal year 2015, 49.7% of collections of defaulted student loan debt was generated from offsets of federal payments through the Treasury Offset Program, including but not limited to Social Security offsets.

Employers can provide a solution for this, IonTuition says. While only 4% of employers provide assistance with student loan repayment, 76% of Americans think it would be great if their employer provided resources to help them manage this debt. Over one third, 36% ,would prefer student loan repayment benefits from their employer over a 401(k), and 29% would prefer these benefits over health benefits.

“Based on our findings, it is likely that Millennials will continue to carry student loan debt late into life much like Generation X and the Baby Boomers,” IonTuition concludes. “American companies are famous for pioneering changes to the workforce [such as] flexible hours, telecommuting and job-sharing.” Offering workers assistance with repaying their student loans could be the next frontier.

IonTuition’s findings are based on a survey of 909 people 35 or older who have a student loan.

Social Security a Bigger Part of Boomers' Retirement Income Plans

Prior to the recession, 43% of middle-income Boomers planned on primarily relying on personal savings in retirement, compared to 34% now.

Thirty-eight percent of middle-income Baby Boomers—those with a household income between $30,000 and $100,000 and less than $1 million in investable assets—expect Social Security will be their primary source of income in retirement, up from 30% before the financial crisis of 2008, according to a study by the Bankers Life Center for a Secure Retirement.

In lockstep with this, 43% of middle-income Boomers planned on primarily relying on personal savings in retirement, prior to the recession. Today, that is only 34%, according to the study, “10 Years After the Crisis: Middle-Income Boomers Rebounding But Not Recovered.”

A scant 2% of middle-income Boomers think the economy has fully recovered, and 65% say they haven’t felt any personal benefit from a bounce back. Of this group, 52% say their savings are lower than they were before the recession, and 40% say they are not earning as much. Sixty-eight percent are worried they will be hit with yet another financial crisis in their lifetime.

Prior to the financial crisis, 45% expected to retire debt-free, and today, that is only 34%. Previously, 23% expected they would be able to leave an inheritance to their heirs, but today, that is only 16%. Nonetheless, 92% of Boomers still plan to retire. However, 48% plan to work either full-time or part-time in retirement—up from 35% before the crisis.

Perhaps one of the reasons their savings are lower is that the recession has prompted 74% of Boomers to change their investment choices, with 28% moving into conservative funds.

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These Boomers’ dismal outlook is grounded in fact, according to Bankers Life. Between 2007 and 2010, the inflation-adjusted median household income in the U.S. fell nearly 7%—and more strikingly, the median net worth of middle-income households fell 39% and homeowners lost an average of 55% of the value of their home.

“Social Security was designed to be a safety net, not a primary replacement for savings or income,” says Scott Goldberg, president of Bankers Life. “Those who are in or near retirement should consider the various ways they can create future income to help achieve a secure retirement. There are products readily available in the marketplace that can help.”

The Internet-based survey was conducted among 1,000 middle-income Boomers between the ages of 52 and 70. The full report can be downloaded here

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