High Student Debt Spells Later Retirement

Growing levels of student loan debt could force today’s college graduates to retire more than a decade beyond the current average retirement age.

So found a recent study published by nerdwallet.com, a personal finance and credit card comparison website. According to the report, most of today’s college grads won’t be able to retire until at least 73 due to high debt loads, 12 years later than the current retirement average of 61.

Study researchers assumed a life expectancy of 84, a median debt load of $23,300, and an average yearly loan repayment of $2,858 for student-debt carrying workers. That amount of debt could costs the typical worker in this class more than $115,000 in lost wealth potential by the time they reach the traditional retirement age, largely due to delayed and diminished payments into retirement accounts.

Researchers stressed that, with $1 trillion in total outstanding student debt, the plight of debt-straddled college graduates is more pressing than ever. The problem is even more crucial, researchers said, when one considers college tuition prices have soared over 200% in recent decades, with no plateau in sight.

Such rapidly expanding debt loads are forcing many college graduates to prioritize loan repayments over contributions to employer-sponsored retirement plans until at least their early 30s, the study found. This translates to an average retirement savings account balance for debt-straddled college graduates of just $2,466 at age 33—more than $30,000 less than if the student had graduated with no debt.

Compounding the problem is the fact that foregone savings carry lost opportunity costs. At the projected retirement age of 73, the lost savings directly attributable to student debt is $115,096, or nearly 28% of total retirement savings.

Though an increasing retirement age does appear to be an inevitable economic reality for graduates with high levels of debt, study researchers suggested that being conscious of the problem and tailoring financial and career planning accordingly can go a long way towards achieving retirement objectives.

Some of the solutions listed in the study include making above-average yearly contributions to a retirement account, working for an organization with a good 401(k) match, and making sure to invest retirement savings intelligently.

A full copy of the study’s findings is available here