SMART DECISIONS
Graduates need to tackle student loans, save for future
College graduates have student loans to pay off, but savvy millenials also want to get a jump on saving for retirement. Can you balance both?
Yes, with the right knowhow. Fortunately, a handful of financial services firms are beginning to offer college savings content on their 401k websites, including tools to help manage student loans and refinance education debt.
Recently, Fidelity Investments said 25 large employers have enrolled nearly 9,000 workers in its Student Debt Employer Contribution benefit. It also added a Credible.com platform that lets employees shop for loan refinance providers.
“Retirement savings companies are starting to think about one’s total financial life, and these loans are particularly important factors for millennials,” said Stephen Dash, Credible’s founder.
All of that is great and there are certainly many families who are severely strapped by education debt.
But really, all sorts of discretionary spending — from lattes to luxury cars — can derail retirement. And with education debt, at least there is a chance that the knowledge will lead to a job or a higher salary that actually will impact retirement in the long run.
The trick is keeping overall costs down by selecting a program that won’t cost vastly more than an eventual salary will cover, and then paying off whatever loans are taken as aggressively as possible.
In the messy business of life, not everyone gets both of those right, but there are ways to recover.
Six years ago, Jared Schulman graduated with a bachelor of arts degree in comparative cultures and politics, and $106,000 in student loan debt.
For a short time, he unloaded trucks at a warehouse. Then he leapt at an entry-level position in the fundraising department of his alma mater, Michigan State University. He dug into database work there, setting himself up for landing his current job in data analytics and strategy for the athletic department at University of Texas in Austin in 2016. It comes with a pension plan and a solid future career path, he said.
To get there, he drove his Honda CRV with 200,000 miles on it and rented space in a friend’s dining room in the early months.
He still shares an apartment with friends to save on housing costs and has refinanced his student loans, foregoing income-based repayment in order to pay it off sooner at a lower interest rate.
He has already cut his debt to $51,000, and plans to pay off the rest in roughly four years, before age 31.
“I enjoyed my job at MSU a lot and could have stayed in Lansing the rest of my life,” he said. But the long-term career ladder was better with the move, and the debt helped him focus.
“That’s part of the push of debt,” he said. “I knew I couldn’t stay where I was comfortable.”
A great lesson for anyone, young or not so young, with goals for the future.