How Student Loan Debt Delays Milestones, Hurts Relationships

Student loan debt is an albatross on the necks of millions of Americans, affecting their ability to save for retirement, their longevity planning and their family relationships, according to research released Tuesday by TIAA.

In a yearlong study of adults carrying student loan debt for themselves or a family member, 84% of respondents said the loans limited the amount they were able to save for retirement. Three out of four borrowers said they expected to begin or increase their contributions once their student loans were paid off.

Among those who said they were not saving for retirement at all, 26% cited the need to pay off student loan debt as the reason.

The MIT AgeLab conducted a two-part mixed-methods study between February 2018 and April 2019. The first part consisted of in-person focus groups with 88 participants, in conjunction with pre-group and follow-up online questionnaires. The study's second part involved a national online survey of 1,874 participants.

In both segments, participants ranged in age from 25 to 75, and were currently contributing to student loan payments for their own and/or an immediate family member's higher education.

Democratic candidates for president have begun to lay out their plans, if elected, to address the student loan crisis. The hopefuls are scheduled to engage one another in the second round of televised debates in Detroit on Tuesday and Wednesday.

Recent Grads to Grandparents

Among millennial study participants who were not saving for retirement, 39% said they were prioritizing student loan payments. Of the parents and grandparents who had taken out loans for children and grandchildren, 43% said they would increase retirement savings once the student loan was paid off.

In focus groups, women, in particular, described how they had put their own financial security in retirement at risk in order to put their children's education and well-being first.

"To be sure, getting a college degree remains one of the smartest investments a person can make in their financial future — but saving for retirement is equally important," TIAA's president and chief executive, Roger Ferguson, said in a statement.

"TIAA has found that people who engage with qualified financial professionals are better equipped to make decisions about paying for education for themselves or a loved one without sacrificing their future financial security."

Many borrowers in the study reported that they did not discuss finances in general — including student loans — with their family. Forty percent of borrowers with loans for themselves and 36% with loans for a child or grandchild said they had never spoken with their family about their student loans.

In many instances, family members were not aware of the financial strains caused by student loans. Half of borrowers with loans for themselves and a third with loans for a child or grandchild said their family knew very little or nothing about the debt they had incurred.

"We have always known that longevity can be optimized by having access to retirement security and support from family," Joseph Coughlin, director of the MIT AgeLab, said in the statement. "What we now know is that for borrowers across the age spectrum, student loan debt can create shocks to both."

Effect on Relationships

According to the research, student loans are also affecting personal romantic relationships, varying with borrowers' loan amounts. Thirty-four percent of those with an initial loan of $200,000 or more reported a negative effect on their relationships, compared with only 6% of those with a loan of $9,999 or less.

Borrowers with higher initial loan amounts also reported greater loan-related delays to traditional milestones. Thirty-seven percent of respondents who had borrowed $150,000 or more said the loan had affected the timing of their marriage, compared with 13% of the respondents with smaller loans.

Fifty-one percent of the bigger borrowers had delayed having children, while only 19% of the smaller borrowers had done so. And those with larger loans were twice as likely as those with smaller ones to put a home purchase on hold.

The study also showed that unclear expectations and poor communication prior to repayment could put couples in conflict.

Thirty-six percent of participants currently contributing to their partner's education who said their current contribution amount was not clear from the beginning reported conflict, compared with 20% of those who said their contribution level was clear from the outset.

Forty-two percent of borrowers who reported that their current contribution amount for their own student loans was not clear from the beginning reported conflict, versus only 17% of those who said their current contribution level was clear from the beginning.

Financial Education Is Key

The study found that student loan debt limits people's confidence in their ability to meet their financial goals.

Twenty-three percent of participants said they were not at all knowledgeable about student loans before incurring them, while only 6% of participants characterized themselves as extremely knowledgeable beforehand.

Just 7% of respondents reported doing their own research before deciding how much to take out in student loans.

And only 8% of parents and grandparents and 3% of student borrowers used the services and advice of a financial advisor when making decisions about funding higher education.

People want and need more financial education to understand and prepare for the impact of their student loan debt, according to the study.

When borrowers were asked what would have helped them most in their financial situation, they said earlier training about finances and money management was the most potentially beneficial strategy for tackling student loan repayments.

"Policymakers, employers, financial services companies and educational institutions all play an important role identifying and creating solutions," Ferguson said.

"Ensuring people fully understand their options and the impact of any loans they do take, along with innovative approaches to retirement plan design that enable employers to jumpstart people's savings while they're paying down their debt, can help address the issue."

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