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Retirees Have More Education Debt Than Ever

There's a joke going around: If you had a nickel for every time you heard someone from the older generation make fun of the younger generation, you'd have enough money to buy a house in the economy they ruined.

There’s a joke going around: If you had a nickel for every time you heard someone from the older generation make fun of the younger generation, you’d have enough money to buy a house in the economy they ruined.

money 

(Photo Credit: Negative Space/stocksnap.io)

Now that’s not totally fair (it’d probably have to a $100 bill every time), but it’s easy to see the underlying truth: costs are rising at a much faster rate than our earnings. Hard to believe? Here’s some data to back it up:

Do You Know What You're Worth?

Let’s first examine the difference in the cost of college, adjusted for 2014 dollars, between 1975 and 2014. According to research from CollegeBoard, a 4-year public college in 1975 cost $7,938/yr. in today’s dollars. In 2014, it cost $18,943/yr. Private college, on the other hand, would have been $16,475/yr. in 1975 (in today’s dollars), and currently it’s around $42,419/yr.

Now let’s examine the rise of minimum wage. According to a study done by Pew, the federal minimum wage in 1975, adjusted for inflation, was about $7/hr. And in 2014: it was $7.25/hr.

No, that’s not a misprint. In inflation-adjusted dollars, the federal minimum wage has risen about 3.6 percent over the last 40 years, while the cost of a year at a private college has increased 157.5 percent.

So Is It Too Late?

Americans who went to college in 1975 are still about six years away from retirement. What’s even more devastating is that the Americans who are starting to retire now still have outstanding student loan debt — and it’s higher for retirees now more than ever.

The average student loan debt leaving college today is about $28,500, which, to be clear, is about the sum of what it cost to go to school in 1975 for all four years in inflation-adjusted dollars. That means that when the current graduating class hits retirement age, if we continue on this trend, they’re going to be absolutely leveled by student loan debt.

Something’s got to give.

For starters, don’t believe it’s ever too late for anyone. There are ways to get out from any pile of debt — no matter what stage of life you’re in. You can check out Dave Ramsey’s budgeting tool if you need a little kick into gear.

Let’s Change Our Focus

On the other hand, we have to start looking harder at career and degree ROI. It’s not as sexy as hitting it big in our dream careers, or winning the lottery — but those things are overrated, and not nearly as creative.

Start thinking about retirement now: Be proactive about your debts, because they’re going to catch up with you, and make it all the more harder to have the kind of retirement we’ve been taught to expect. Whether it’s a matter of a career change or a lifestyle change, there may be some adjustments that you need to make now so that you’re not drowning at the end of your career.

Let’s teach our kids to be smarter about choosing a career and education that makes sense for the future, not just encourage them to go to college because “it’s what people do.” And hey: maybe the new bill that was proposed in congress to make public universities free will pass and you can forget everything this article touched on.

Tell Us What You Think

How do you think we can reduce education debt for retirees? We want to hear from you! Leave a comment or join the discussion on Twitter.

Peter Swanson
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