11/18/2016
DON’T LET STUDENT LOAN DEBT RUIN YOUR RETIREMENT
Statistics has shown that Americans owe nearly $1.3 trillion in student loan debt, spread out among about 44 million borrowers. In fact, the average Class of 2016 graduate has $37,172 in student loan debt, up six percent from last year. Student debt is a form of debt that is owed by an attending, withdrawn or graduated student to a lending institution. The lending is often of a student loan, but debts may be owed to the school if the student has dropped classes and withdrawn from the school.
Student loans also differ in many countries in the strict laws regulating renegotiating and bankruptcy. Due payments may be a retroactive penalty for services rendered by the school to the individual, including room and board. As with most other types of debt, student debt may be considered defaulted after a given period of non-response to requests by the school and the lender for information, payment or negotiation.
Nearly 70% of bachelor’s degree recipients leave school with debt, according to the White House, and that could have major consequences for the economy. According to researchers at the New York Fed Student loan balances among borrowers in their 50s or older made up 17 percent or about $204 billion of the nearly $1.2 trillion in outstanding student loan debt in the U.S. last year. Research indicates that the $1.2 trillion in student loan debt may be preventing Americans, from making the kinds of big purchases that drive economic growth, like house and cars, and reaching other milestones, such as having the ability to save for retirement or move out of mom and dad’s basement.
Student loans never just go away not even for senior citizens collecting Social Security. In this struggling economy, that means more seniors than ever before are seeing portions of their Social Security checks seized by the U.S. government due to defaulted student loans.
After poring over Treasury Department data, the financial website Smart Money concluded, “The federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans. From January through August 6, the government reduced the size of roughly 115,000 retirees' Social Security checks on those grounds. That's nearly double the pace of the department's enforcement in 2011; it's up from around 60,000 cases in all of 2007 and just six cases in 2000.
Don’t default on your loan
Repaying your loans in full which you're legally obligated to do could have a serious impact not just on your short term finances, but also on your retirement. No matter your age or income, for every $1 of student debt you accrue, you're likely to decrease your retirement savings by $0.35 reveals a Morningstar report. So if you finish college $37,000 in debt like the average recent grad, you'll set yourself back almost $13,000 in retirement savings.
Let's consider this scenario you're 26 years old and spend the next 10 years paying $350 a month until you finally knock out your student loans. If you were to spend those 10 years saving $350 a month for retirement instead without contributing another dime to a retirement account past age 36, you'd have over $770,000 by age 69 assuming an 8% average annual return on investment (which is doable with a stock-focused portfolio). The more debt you take on, the greater your chances of having to delay retirement or, worse yet, run out of money in your old age. That's just not a risk worth taking.
Older borrowers are also more likely to have defaulted on loans (which means they fell in the back of or didn't make bills), and plenty of incorrectly believe their balances may be discharged in financial disaster. Scholar loans are cancelled when a borrower dies, not whilst the borrower retires, reminds Kantrowitz.
In case you do not have the money to pay for university outright, which maximum folks don't, it's time to explore decrease-fee options for getting your degree. At the least, choose an in-state school, where you may save an average of $24,000 a year as compared to a non-public university. Higher yet, choose a school that's commutable. At the same time as you might leave out at the dorm revel in, you'll shave an amazing $10,000 off your invoice each year. Make your payments on time. If your loan goes into default, the government can garnish your wages, withhold your tax refund or even take a portion of your Social safety benefits.
Stretching out the term of your student loan as long as feasible through prolonged bills or profits based totally repayment can assist to lessen the month-to-month price to a more inexpensive stage and enhance coins float, although remember the fact that you may turn out to be paying extra in hobby over the life of the student loan.
Take the less expensive road to a degree could be helpful. There's a difference between taking on student debt in pursuit of your degree and getting in way over your head to attend a big-name college that may or may not lead you toward a successful, lucrative career. Sure, there's something to be said about graduating from the college of your dreams, but given the long-term financial sacrifice you might make to get there, you'll need to ask yourself whether the cost is ultimately worth it.
Consider refinancing options
Many people just aren't aware of the refinance options out there. Refinancing student loans may also help borrowers with excellent credit find lower interest rates. Refinancing all or some of those loans enables borrowers to receive a new loan at one interest rate that, depending on the borrower's circumstances, tends to be lower than what they were paying previously," said David Klein,
CEO and co-founder of Common Bond, a startup student lending platform that refinances existing graduate student debt.
Social Security Bonus
Most retirees completely overlook Social Security bonus. If you're like most Americans, you're a few years or more behind on your retirement savings. But a handful of little-known Social Security secrets could help ensure a boost in your retirement income. Once you learn how to maximize your Social Security benefits, you could retire confidently with the peace of mind we're all after. ©Working our Wealth
