Editors' pick: Originally published Jan. 13.
While college students are taking out more and more money to pay for school, those loans may not just be making it harder to pay rent after graduation.
College graduates' retirements may be getting shortchanged due to the bills they run up getting a degree, according to new research. In fact, workers with student loans participate in employer-provided retirement plans at a lower rate than those without — 71% compared to 77%, according to a study released by retirement and health solution provider Aon Hewitt.
"It is a very difficult decision for young college graduates to prioritize their finances as it pertains to student loans and contributing to a retirement account," said Sandy Young, founder of SY Financial Group in Maryland.
The study also shows —perhaps even more disconcerting — more than half of workers with student loans are contributing only 5% or less of pay to their retirement plan.
"When you are faced with this dilemma, most people focus on the here and now and this can be a costly mistake," Young said.
Young said to help ease the pain of the repayment phase of student loans, workers should take advantage of repayment programs such as income based repayment, income contingent repayment and income sensitive payment.
"I believe that making the minimum payment is better than nothing," she said. "Don't let yourself be overwhelmed about the total amount of debt, just try to manage to make payments consistently."
Andy Josuweit, CEO of Student Loan Hero, said paying off debt should always be the top priority for those who are looking to better their finances, so it's not surprising that many student loan borrowers put off retirement savings as a result.