By Chris Taylor
NEW YORK (Reuters) – Generation X is often referred to as the “Forgotten Generation,” eclipsed by bigger demographics like Baby Boomers and Millennials.
But here is something that is not forgotten: Their student debt.
Just ask Debbie Irk. The rehab counselor from South Bend, Indiana, got an associate degree from the University of Phoenix in criminal justice, hoping to go into law enforcement.
To do so, she took out around $50,000 in loans, which have since ballooned to $77,000. Irk tried to make the monthly payments of $652 – almost as much as her rent – but it was hard to keep up.
With the pandemic pause on repayments winding up, she is not sure how she is going to make the numbers work.
“I’m sitting on a pile of debt, and it just keeps growing and growing,” says Irk, 46, who also cares for a disabled husband. “I’m really at a loss as to what to do.”
She is not alone as a Gen Xer who is still grappling with student debt. In fact, 13% of working Gen Xers are still dealing with it, according to a new report by the National Institute on Retirement Security (NIRS). The average amount held: $40,000.
The particular worry for Gen Xers is that, since many are well into their 50s, retirement is starting to loom over the horizon. That means many competing financial responsibilities, familiar to the Sandwich Generation: student debt, retirement saving, raising kids and sending them to college, and caring for elderly parents.
Something has to give – which is why Gen Xers still dealing with student debt often sacrifice saving for retirement.
“There are clearly some tradeoffs happening here,” says Tyler Bond, research director for NIRS who authored the report. “For those Gen X with student debt, the average amount of retirement savings is consistently lower. They are not hitting their savings targets.”
To be sure, President Joe Biden’s proposals to wipe away some student debt could have helped people like Irk, but were halted by the Supreme Court. The future of such efforts is unclear.
With retirement starting to come into view for those in their 50s, the clock is ticking before student debt haunts their golden years.
“These student debt repayments can last for 30 years,” says Evan Potash, a wealth management advisor with TIAA. “I have clients who are still paying them, well into their 50s.”
A few thoughts for Gen Xers who are still feeling squeezed by student debt:
BE AWARE OF SECURE 2.0 CHANGES
This relatively new federal legislation includes provisions that can help change the game. In particular, starting in 2024, participating employers will be able to match your student loan repayments with contributions to your 401(k).
TAKE ADVANTAGE OF PUBLIC SERVICE DEBT FORGIVENESS
If you work for government or a nonprofit organization, you could benefit from this program, which wipes away remaining federal student debt after 10 years of payments.
Check out details here: (https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service). A related program is Teacher Loan Forgiveness (https://studentaid.gov/manage-loans/forgiveness-cancellation/teacher).
UTILIZE THE ‘ON RAMP’ IF NECESSARY
For those having trouble handling a resumption of federal student loan repayments, there is a so-called “on-ramp” to help. For a year until Sept. 30, 2024, borrowers will avoid the harshest consequences for late, partial or missed payments – they will not be considered in default, reported to credit bureaus, or referred to debt collection agencies.
START WHERE YOU ARE
For mid-career professionals who have not been able to make a start on retirement savings, it can be tempting to throw up your hands in despair, since the end goals seem so unreachable.
But the reality is that Gen X still has a long career runway ahead.
“Younger Gen Xers are still likely to work for another 20 years,” says NIRS’ Bond. “You still have time.”
BE STRATEGIC ABOUT IT
For Gen Xers with multiple financial responsibilities that include student debt, you have to be thoughtful about which bills you are attacking first, says TIAA’s Potash.
Make the minimum payments on all of them, of course – but beyond that, make additional principal payments on the highest-interest-rate debt, such as credit cards where rates are at all-time highs.
Even when the debt load seems impossible to handle, there is still hope. Just ask Potash himself, who once wrestled with owing a whopping $240,000 for his degree – and just made his final payment earlier this year.
“It was the best feeling I’ve ever had in my entire life,” Potash says.
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