As student loan debt’s threat to retirement grows increasingly clear — at $1.3 trillion, it eats up resources that might otherwise go toward retirement savings — Fidelity Labs, the research and development unit of Fidelity Investments, is beta testing a tool designed to help.
The Fidelity Labs Student Debt Tool, now piloting, is a three-phase program.
The first guides people through ways to manage existing student loan debt and illustrates available options. Part of this phase is an aggregation tool that allows users to evaluate repayment options on the aggregated balance of their loans.
The second phase focuses on helping users avoid taking on more debt than they can afford, via precollege financial literacy programs that help parents discuss both the cost of college and financing options with their kids —as well as ways that student loan debt can affect their lifestyle.
The third phase focuses on where the management of student loan debt fits in among other competing goals — including retirement.
The ballooning growth of student loan debt has seen younger people put off other life goals, such as getting married and buying a home or a car. It also endangers the retirement savings of not just younger people, but older ones as well, with some older people still paying off their own student loans while others are helping out their kids by taking on debt to pay for their education — despite knowing what a threat that may pose to their other financial goals.
Employee benefit programs that assist workers in paying off their loans are becoming increasingly popular, even as a study has found that young workers can have greater net wealth by letting those loans ride in favor of putting money into retirement savings.
Currently Americans owe more money on student loan debt than they do on credit cards or cars, and data from the Federal Reserve’s Survey of Consumer Finances indicates that for every additional dollar of student loan debt, retirement savings decrease by 35 cents.
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