Five to six figures in student loan debt is no longer unusual. At the time of taking out the debt most borrowers are optimistic that they would be able to borrow for college and maybe for graduate school, confident that they would be able to earn enough to pay back the loans, meet their current living expenses, take vacations, save for their children’s education and pay for retirement. For far too many student loan borrowers their incomes are too meager to stretch so far.
For many people, the choice between paying back their student loans and saving for retirement seems like an impossible choice: pay student loans at the expense of retirement savings. In 2016, it is estimated that 70% of all borrowers have delayed saving for retirement. However, it is both well known and well documented that delaying saving for retirement comes at a huge cost. For every year that a person delays saving for retirement their contributions have to increase two-fold. The two fold increase is the result of two factors caused by the delay: there is one less year to save before retirement, and because there was no savings, the lost returns have to be made up. But it doesn’t have to be that way.
If the average graduate in 2016 has $37000 in student loan debt, how do the numbers work for to pay both retirement and student loans.