Now The Proof!

On March 24, 2017, I penned a blog post titled, “And Then There Are The Student Loans”. Here are the last two paragraphs from that post –

“The significant increase in the cost of education and the greater use of student loans to meet this expense is placing an unfair burden on our younger generation. This burden makes it nearly impossible for one to begin to fund a defined contribution retirement plan, but that is basically what we are left with at this stage. The more it delays funding the less likely it is that one will generate a retirement account meaningful enough to accomplish one’s goal of retiring.

At KCS, we focus on issues related to one’s ability to retire, but the burden of greater educational costs impacts so much more from establishing family units, housing, and the general demand for goods and services. It isn’t shocking to us that the US economy hasn’t generated a >3% GDP growth since 2005 when one looks at the significant growth in student loan debt since 2006.”

The Student Loan Debt and Housing Report 2017 by the National Association of Realtors and the nonprofit group American Student Assistance finally bring some relevant statistics to this discussion (thanks, Mike “Mish” Shedlock for your blog post), and they are UGLY!

51% of student loan borrowers have more than $40,000 in debt

83% of non-homeowners reports that student loan debt is keeping them from buying a house, and the delay in buying a home is seven years!

32% of student loan borrowers have defaulted or forbore on their loans

Only 13% have not had a life event delayed, while more than 50% have said that student loan debt has delayed further education or starting a family.

35% of younger Millenials (1990-1998) live with family compared with older Millenials (1980-1989)

Given the demise of the DB plan and the greater use of DC plans, in which the individual is primarily responsible for funding their retirement program, is it realistic to believe that these accounts are getting the funding that they need? Of course, it isn’t! Funding a DC plan with as much as you can as early as you can goes a long way to preparing one for retirement, but that is becoming a pipe dream in this environment.

We have a retirement crisis, and it will only get worse if we can’t solve how our citizens can afford education and healthcare costs that have gone through the roof, while still being able to contribute to their DC plan!




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