Could Your Kids’ Student Loan Debt Jeopardize Your Retirement?

Student loan debt continues to balloon. Data released in March revealed that 46% of student loans are not currently being repaid. That doesn’t even include debt held by students still in school or those within the six-month grace period after graduation.

Clearly, this has major implications on the financial futures of Americans saddled with this debt. It could mean putting off major purchases like homes and cars, further dragging down an already sluggish economy. And what happens when these debtors begin to default? Everyday Americans are on the hook. Total taxpayer exposure to student loan debt, including government guarantees for private loans, stands at more than $1.3 trillion and is increasing at about $2,726.27 every second.

There are already pricks in the student loan bubble. As SchiffGold Precious Metals Specialist Addison Quale reported last month, a new Obama administration program could forgive more than $7.7 billion in student loan debt. That number could skyrocket even higher if federal courts ultimately decide to allow student loan debtor to discharge what they owe through bankruptcy.

If all of this wasn’t enough, a recent MartketWatch report reveals yet another less visible burden created by student loans. This falls on debtors’ parents. A record number of parents – more than 60%  – say they are considering helping their kids pay off student loans, and this could ultimately put their retirements in jeopardy:

The financial implications that come with paying off kids’ student loans can make for a ‘grim reality’ for parents because, by doing it, they are often underfunding their own retirement, or in some actually withdrawing retirement funds, says Kimberly Foss, the president and founder of Empyrion Wealth Management. ‘As a parent, I understand the desire to help our kids, but as a financial professional, I caution against dipping into your retirement savings for anything other than retirement,’ says Mike Falco, the president of Falco Wealth Management near Philadelphia. Though your kids can get loans for college, he says, ‘you are not going to find a loan to fund your retirement.’”

Nevertheless, parents feel a great deal of pressure to help out. Many worry about the impact student loan debt will have on their kids’ financial future and independence. Others feel the debt is a “shared burden” and that they have an obligation to help because they didn’t save enough to assist with their children’s education in the first place.

Adding to the problem is the fact most parents are already undersaved for retirement.

People in their 40s have a median retirement balance, including IRAs and 401(k)s, of just $63,000, and for those in their 50s, it’s just $117,000, according to data released in 2015 by the TransAmerica Center for Retirement Studies.”

This serves as yet another example of the sweeping impact the current student loan crisis has on the country. I goes far beyond the people holding the debt and will ultimately affect the entire economy. To learn more about the student loan debt crisis and how it may impact you directly, get Peter’s exclusive white paper The Student Loan Bubble: Gambling with America’s Future.

Download SchiffGold’s Free White Paper on The Student Loan Bubble

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