Student debt weighs down millennials' future
Alex Prigge's schedule is pretty full these days.
In fact, it's been that way since she started teaching physical education five years ago. She's been cramming her weekends and school breaks with second — and sometimes third — jobs, her $70,000 in student loan debt always in the back of her mind.
Like many millennials, Prigge, 29, amassed tens of thousands of dollars in student loans and will spend years paying for it. She dreams of the day when she can focus on just being a teacher, but even if everything goes according to plan, she still has nine years left before her loans are forgiven thanks to a program for public employees.
She has made many decisions based on the amount of student debt she carries. She lives with a roommate in a town home her student loans almost prevented her from buying. She found furniture on Craigslist and is always looking for ways to save a little extra cash.
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"They're to the point where I'm only paying interest (on my student loans)," she said. "So as long as the public employee loan forgiveness continues, if I work 10 years as a full-time public employee, they'll be forgiven. It's still kind of frightening. It's not something I wanted, to be just paying interest on my loans."
As many Baby Boomers face retirement crises, many of their children and grandchildren have entered the workforce facing significant debt. This can make covering basic expenses difficult, and saving for retirement a big ask. Buying a home, which can be one of the biggest sources of equity in retirement, is also hard for those who graduate college saddled with debt, especially if they're looking to buy in Northern Colorado's pricey real estate market.
Some young people, like Prigge, have bent over backwards, living at home or with roommates and cutting other expenses to make sure they're tucking away money in IRAs or 401(k)s.
Chris Stein, who teaches in the Finance and Real Estate Department at Colorado State University, said many young people's attitudes about money were shaped by coming up during the most recent recession. After watching their parents and grandparents struggle to save enough money to retire, many young people now are debt averse other than student loans, and are more willing to live below their means, he said.
"Twenty-year-olds are starting to see the effects of not saving enough for retirement," he said, adding that many saw family members or family friends struggle as they reached retirement age. "People are facing a great reduction in lifestyle ... That's being seen by this generation. Hopefully it encourages them not to repeat that."
Still, the burden of student debt looms over the heads of many young people.
In 2014, 37 percent of households headed by those under age 40 were dealing with student debt of some kind — the largest percentage on record, according to the Pew Research Center.
That research also showed that the median amount of student debt was about $13,000. Stein said even young people trying to prepare for the future can get stuck in a rut of paying student loans off, and that can force them to go further into debt or delay certain goals.
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"You can really start to get that debt snowball going early," he said, noting that many people take out student loans when they are 18 and 19 years old. "They have this glamorous view that they're going to have this job, make all this money. That (student debt) is taking a big chunk out of their monthly revenues. It harms everything, whether it's specifically attached to retirement savings, although people are tempted to neglect that first."
Derek Brown, 32, considered leaving Fort Collins so he could afford to buy a house sooner and start building some equity. But ultimately, he decided to stay put, and he and his girlfriend are working to save enough to buy a home next year. This has meant cutting back on a lot of little things. He doesn't eat out much, and when he's at the grocery store, he looks at every purchase, and whether it's something he really needs. Still, he has not started saving for retirement. For him, it works best to focus on one financial goal at a time, he said.
"I don't think there's a right time for anything," he said. "You just need to do what feels good to you and stop focusing on what other people are trying to dictate for you."
Stein said he recommends people start saving for retirement as early as possible. A person who starts saving when they're 25 as opposed to 35 could end up with twice as much in their retirement account, for example. He tells all of his students to put away 15 percent of their paychecks toward retirement. That way, regardless of what happens with entitlement programs such as Social Security or the stock market, they have put away enough to live on.
"If you save higher amounts, the worst thing to happen would be you retire at a normal age," he said.