You have heard the message for years: A college education will give you vastly expanded career opportunities and dramatically higher income for the rest of your life. Easy as pie, right?
Not if you have to take out student loans. New data from LIMRA, an association providing research and consulting to insurers, shows that just $30,000 in student debt can cut as much as $325,000 from your 401(k) balance by the time you retire.
That is hardly an outlandish amount to borrow. As of 2014, the average student graduating with debt had borrowed $28,950, up from $18,550 a decade earlier, according to The Institute for College Access and Success. And some 69 percent of the class of 2014 borrowed for college.
If millennials had access to defined benefit retirement plans, where employers made contributions on their behalf, their retirement would be more secure. But only 10 percent of workers under age 30 have access to a defined benefit plan, according to LIMRA's Secure Retirement Institute. That means the onus for retirement saving is almost entirely on them, and those paying down debt are at a clear disadvantage.
"With Gen Y being in defined contribution plans, the time for them to really get ahead is in their 20s and early 30s, but if they have a huge student loan, they really can't do that," said Michael Ericson, research analyst for the institute.