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Could Your Kids’ Student Loan Debt Jeopardize Your Retirement?

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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.

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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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One thought on “Could Your Kids’ Student Loan Debt Jeopardize Your Retirement?

  1. jmhsrv says:

    Avoid student debt at all cost, especially through Sallie Mae. They are nothing short of a Federally protected loan shark.
    In 1994 I took out a $12,000 loan to attend college. Due to a family crisis, I had to withdraw from school so that I could pay for health insurance for my ill wife. As a result, my loan went into payback status requiring monthly payment. I was in no position to afford payments at the time and had to defer the loans until 2002 – by the time I was able to start paying back the loan, it had ballooned to over $38k. I have been paying $300/month since 2002 (13 years). For many years the payments hardly made a dent due to compounding interest. To date I have paid back over $35k on a $12k loan.
    The $300/month I send Sallie Mae is three times as much as I have to spend on all my living expenses each month. The payments are paralyzing. The $300 per month I send Sallie Mae would be life changing for me. $300 would mean 3 square meals, new clothes and medical needs met. Instead I have to send that money to Sallie Mae.
    Over the years I have begged Sallie Mae to forgive my loans. I have paid back so much more than I borrowed. All they every offer is reduced payments. The end result would be more debt for a longer time.
    If I stop paying my loan Sallie Mae will garnish my wages, if I lose my job, they will garnish my social security. Sallie Mae is federally protected from bankruptcy and there is no other alternative. I have pleaded with Sallie Mae to forgive the remainder of the loan, but all they offer is reduced and interest only payments – end result of either of those is debt growth and longer payback – I have already been paying back this loan for over 13 years and the loan itself is over 20 years old. The last thing I want to do is increase the term of the loan. I have even asked them to reduce the interest rate (7%), to which they respond my loan was taken out under the 1963 Student Loan Protection Ac and the interest rate is non-negotiable.
    I am 52 years old. II have been paying on a loan for over 13 years that was issued over 20 years ago. I will not be finished paying off my load until I am 55 years old. The $35k I have paid to Sallie Mae could have paid for my daughter’s education. Instead my hard earned money has been feeding a corporation that is probably tax exempt. The original loan was $12k, I have repaid over $3k.

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