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Student debt and retirement saving don't add up

America already has a retirement crisis, but it might end up even bleaker than some suspect.

Thanks to the nation's $1.2 trillion student loan debt, many college-educated professionals aren't saving as much as they should be to ensure a secure retirement. The problem isn't an easy one to solve, given that a college degree typically provides a foothold into a career and higher lifelong earnings. The downside lurks in the fact that working-age professionals with student debt must service that debt first, with retirement becoming a less-important and distant factor.

"If you're putting money aside to pay student loans, how much can you really save?" said personal finance expert Helaine Olen, author of "Pound Foolish" and co-author of "The Index Card. "You have a basket of money, and you can only divide it so many ways."

How to balance student loans and retirement savings

How student loan debt can have an impact on today's workers was put to the test by the Center for Retirement Research at Boston College. Researchers wanted to find out what would happen to college grads who owe $31,000 each in student loans, the average amount of student debt in 2013.

The group looked at the question through the lens of the National Retirement Risk Index, which assesses the percentage of working-age households at risk of failing to sustain their standard of living once they hit retirement.

As of 2013, the index found that 51.6 percent of households are at risk of falling short, even if all households continued working until age 65 and they tapped into all their available financial options, including reverse mortgages. Right off the bat, that's not a favorable percentage.

But what would happen to the index if all adults started their careers with $31,000 in college loan debt? If you're getting a sinking feeling, you're on the right track.

The share of at-risk households would jump by 4.6 percentage points, meaning 56.2 percent of Americans would likely enter retirement without enough assets to maintain their standard of living.

Acting education secretary on student debt problem

"We're not facing a crisis of poverty in the sense of households not having enough to eat," said Anthony Webb, a research economist with Boston College's Center for Retirement Research. "The crisis is that a lot of households will not be able to maintain their standard of living and that a lot of households will fall out of the middle class in retirement."

Webb noted that student debt in and of itself may not be problematic. Students who earn a STEM degree (in science, technology, engineering or math), for instance, are likely to find high-wage work that will more than repay their initial investment.

Increasingly, however, researchers are finding that college grads from poorer families miss out on the same earnings boost that wealthier students get after graduation, according to researchers at the Brookings Institution. At the peak of their careers, poorer students on average end up making half the income of wealthier students.

"Student debt is not a problem if the people borrowing are getting a valuable education that will increase their lifetime earnings," Webb said. "The bottom line is that if more of your income has to be spent on student debt repayments, then something else has to give. The question is: What should that something else be?"

Take Danielle Adorno, a 29-year-old who works as an organizer with the Debt Collective, an organization that advocates on behalf of students who attended for-profit colleges. She said she has $25,000 in student debt after attending The Art Institutes, a for-profit college that has been embroiled in controversy over its recruiting techniques. Its parent company agreed to pay almost $96 million to California last year to settle allegations that it illegally paid recruiters based on the number of students they enrolled.

"Student debt is impeding our country. It's stunting life growth," Adorno said, noting that she hasn't been able to put away any savings for her retirement. She added, "Retirement isn't even a thought."

Her husband, whom she met at The Art Institutes, has $30,000 in debt, is somewhat more fortunate because his work as an apprentice elevator mechanic means his union takes some money out of his paycheck for retirement, she said. But the amount "is laughable," she added. "At the rate our cost of living is going up, he would not be able to sustain any quality of life after he retires."

It's difficult to predict how today's crop of indebted college grads will fare, given that many are decades away from retirement. Another potential issue is the rising age for claiming full Social Security benefits, which traditionally was 65 years old. That has been raised in recent years, so Americans born after 1960 won't be able to claim full benefits until they turn 67.

Webb added, "That's the equivalent of a cut to benefits for a household that plans to retire at 65."

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