The American Institute of CPAs (AICPA) recently released the results of a survey about how people are handling repayment of student loans and nearly half said they have postponed contributions to retirement plans because of it.
When asked if the student loan debt experience points out a need for good savings habits and maintaining a good level of financial literacy, both of which could positively or negatively impact saving for retirement down the line, Ernie Almonte, chair of the AICPA’s National CPA Financial Literacy Commission, told PLANADVISER, “One of the most startling statistics from our survey is that only four out of 10 people fully understood the burden that student debt would place on their futures. This really underscores the importance of financial education so that young adults realize how decisions they make early on will reverberate through the rest of their lives.”
Almonte added, “Make no mistake: a college degree can be a powerful investment. But the payoff is diminished if the debt takes decades to eliminate and slows progress toward future goals like retirement. Our survey showed that many people are making just that sacrifice. Forty-one percent of those surveyed said they have delayed contributions to retirement accounts because of student debt.”
The findings also showed that due to student loan debt: 40% have delayed car purchases; 29% have put off buying a house; and 15% have postponed marriage. Almost 39 million U.S. adults had student loan debt at the end of 2012 – 70% more than in 2004, according to statistics from the Federal Reserve Bank of New York. During that same time, the total amount of student debt nearly tripled to $966 billion to become the biggest non-mortgage debt burden in America. The average student loan balance was $24,803.
With regards to student loan debt, Almonte advised, “It should be approached like any other investment—with a clear understanding of the risks, rewards and expected return.”
Since 2007, AICPA has conducted an annual survey of Americans to determine their top financial concerns and assess their financial well-being. Harris Interactive conducted this year’s telephone survey in March 2013 with 1,011 adults ages 18 and older.
Highlights of the AICPA survey can be found here.