It's Official: Student Debt Is Not Just a Young Person's Problem

Many recent college graduates are now first entering the working world wondering how on earth they're going to manage their student loan payments. And countless workers in their 20s are walking around with nagging debt payments even though it's been years since they last set foot in a lecture hall.

But new data from NerdWallet reveals that student debt is by no means just a younger person's problem. In fact, An estimated 62.5% of Americans with student debt are 30 or older. And they're the ones who risk compromising their long-term financial security as a result.

Will long-term student debt derail your retirement?

The problem with carrying student debt later in life is that it ties up your money, thereby preventing you from saving for other pressing goals, such as retirement. In fact, Morningstar conducted a study a couple of years back that found that for every dollar of student debt you accumulate, you'll reduce your retirement savings by $0.35. This means a borrower who comes away from schooling $40,000 in the hole will lose out on $14,000 of retirement income.

Granted, this formula applies to borrowers young and old. But whereas many folks manage to pay off their student debt in 10 years (the standard repayment period for federal loans), it's clear that a large number of Americans who are well past the 10-year post-college point still have loads of debt they need to contend with. And those irksome monthly payments could be the one thing that prevents them from making steady retirement plan contributions, thereby putting their future in jeopardy.

Think about it: Imagine you're 40 years old with the goal of retiring at 67. You want to start funding your nest egg, only you can't, because you're still making a $300 monthly payment toward your student loans.

Now let's say you do pay off those loans by age 50, at which point you start putting that $300 a month into your IRA instead. Assuming your investments generate a 7% average annual return over the 17-year period between then and retirement, you'll be looking at a nest egg of $111,000. But had you started 10 years prior, you'd be sitting on $268,000 instead -- more than double, and enough to spell the difference between a reasonably comfortable retirement and a cash-strapped one. And that's why it's crucial to tackle your student debt problem if you're older and don't have an end in sight.

Ridding yourself of student debt

The one advantage older Americans seemingly have over younger ones with regard to student debt is that their salaries tend to be higher. (It's fair to say that the typical 40-year-old earns more than the average 25-year-old.) At the same time, our expenses also have a tendency to increase as we age, thereby eliminating the aforementioned edge. Many of us buy homes. Some of us have children. All of these things can eat away at our boosted wages, thereby trapping us in that seemingly never-ending cycle of student debt.

So, what can you do to break free? First, take a look at your budget and aim to eliminate or reduce as many expenses as possible. That could mean downsizing your living space, canceling cable, or cutting back the amount you spend on restaurants and leisure. Freeing up that cash to pay down your debt more quickly will reduce what you ultimately spend on loan interest, thereby saving you money over the life of your loan.

Another option is to work a temporary side hustle to make a sizable dent in your student debt. The benefit of taking on a second gig is that the cash you earn isn't money you were counting on to pay your regular bills. Therefore, you should have no problem applying it directly to your loans.

Finally, if your credit is great, you might consider refinancing your student debt, which essentially means swapping an existing loan for a new one. The goal in doing so is to lower your interest rate, thereby reducing your monthly payments and freeing up cash that can go into a retirement plan instead.

Carrying student debt later in life can destroy your long-term goals. Don't let it. Take steps to knock out that debt sooner. You'll not only save money, you'll enjoy the peace of mind of not having a pesky loan payment to make every month.

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