Carstens Financial Group
  • Home
  • About Us
    • Pro-Am
  • Services
    • Retirement Income Strategies
    • Tax-Efficient Solutions
    • Investment Planning
    • Long-Term Care
    • Estate Preservation
    • Securities
  • Resources
  • Blog
  • Contact

Blog

Student Loans and Retirement: A Dangerous Combination

4/6/2017

0 Comments

 
Picture
​Every parent wants the best for their child. It’s a natural desire. That’s especially true with regard to education, as a quality education can open up a world of opportunity. Funding that education can sometimes be difficult, though.
 
Many families turn to student loans to cover much of the tuition for college. While student loans can be a helpful tool, they can also become a serious challenge for some graduates, especially those who are entering a soft job market.
 
Student loans aren’t just an issue for graduates, though. Many parents are also feeling the sting of student loan payments. According to estimates from the Government Accountability Office, as of 2015 there were 2 million holders of Direct Plus Loans from age 50 to 64. There were an additional 200,000 Direct Plus Loan holders over the age of 65. Those numbers have more than doubled since 2005.1
Direct Plus Loans are a certain type of loan that allows a parent to borrow money to pay for their child’s education. Many parents opt for this type of loan to protect their children from student loan debt, or because they have greater borrowing capacity than their child.
 
Even if you don’t take a Direct Plus Loan for your child’s education, you could still be on the hook for student loan payments. Many loan providers require parents to co-sign for their children’s loans. If your child can’t make the payments after graduation, the burden may fall to you.
 
As you near retirement, these student loan payments can be increasingly problematic. If you’re covering some or all of your child’s payments, that’s money you can’t contribute toward retirement. You may even be forced to work longer than you’d like to continue making the payments.
 
Fortunately, there are steps you can take to ease the burden. Below are a few tips to help you minimize the pain of your child’s student loan debt and to protect your retirement:

Protect retirement as a top priority.
 
You might be tempted to pause your retirement savings so you can put a dent in the student loan balance. This could be a mistake. Your retirement could last for decades, and you could face high costs in retirement for medical care or even long-term care. Inflation will likely drive up your spending needs, too, as you advance through retirement.

If you stop your retirement contributions to focus on loan repayment, you could miss your retirement savings target. Make sure you keep retirement as a top financial priority. Set a firm amount that you will contribute to retirement every month, and don’t deviate from that amount for the sake of student loan debt.

Consider refinancing.
Many lenders know that families struggle with student loan debt. That’s why some companies offer refinancing options to those who have strong credit. You may be able to refinance your loan balance into a product with a lower interest rate, which would allow you to pay down the debt faster.
 
You also may have access to lending tools that have lower interest rates, like home equity lines of credit. If so, perhaps consider using that funding to pay down the loans so you can get a lower payment.

Be honest with your child.
Does your child understand your retirement needs and goals? Don’t assume that they do. Many young people don’t fully comprehend how difficult retirement planning can be.
 
Have a conversation with your child and show them how much money you need to save to be able to retire comfortably. You also might remind them that if you don’t save enough to retire, it could be you who needs their help in the future.
 
If they understand your needs and goals, they may be more willing to contribute their fair share to paying off the student loans. If you’re making payments on their loans, consider working out a plan in which you gradually transfer the responsibility of the loan back to them over time. That allows them to make the necessary changes to their budget, and it gives you some certainty on when your share of the payments will end.
 
Need advice on how to protect your retirement from student loan costs? Contact us at Carstens Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect today.


1http://www.marketwatch.com/story/college-loans-are-making-it-harder-for-parents-to-retire-2017-02-27
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
16531 - 2017/3/22
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    Kirt Carstens

    Carstens Financial Group focuses on providing comprehensive asset management, estate planning and life insurance solutions. Allow us to help you secure your financial future.

    Archives

    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    January 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    January 2015
    December 2014
    November 2014
    October 2014
    September 2014

    Categories

    All
    2020
    CARES Act
    COVID
    Economic Update
    Election
    Employer Plans
    Estate Planning
    Fed Chairman
    Financial Planning
    Fourth Quarter
    FRA
    Full Retirement Age
    Funding
    GDP
    Health Care
    Health Savings Account
    HSA
    Income
    Inflation
    Insurance
    Managing Medical Expenses
    Medicare
    Planning
    Portfolio
    Retirement
    Retirement Home
    Retirement Planning
    Retirement Strategy
    Risk
    Risk Tolerance
    Say Yes
    Social Security
    Stimulus
    Stock Market
    Supplemental Retirement Income
    Tax Planning
    The Market
    Working In Retirement
    Working Part Time
    Yes

    RSS Feed

Kirt Carstens, CLU, ChFC
Investment Advisor Representative
P: (712) 332-5960
F: (712) 332-5391

605 Hwy 71 S
Arnolds Park, IA 51331
Get Directions

Home     About Us     Services     Resources     Blog     Contact

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation.

Securities and Advisory Services offered through CreativeOne Securities, LLC Member FINRA/SIPC and an Investment Advisor.  Carstens Financial Group and CreativeOne Securities, LLC are not affiliated.
​
This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional.  The statements and opinions expressed are those of the author and are subject to change at any time.  All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only.  It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. 

Check the background of an investment professional.  |  Privacy Policy
  • Home
  • About Us
    • Pro-Am
  • Services
    • Retirement Income Strategies
    • Tax-Efficient Solutions
    • Investment Planning
    • Long-Term Care
    • Estate Preservation
    • Securities
  • Resources
  • Blog
  • Contact