The NY Times analyzes the impact of student loans on savings of students over their lifetimes with help of Vanguard. The article notes the following:
It’s hard for new college graduates — let alone teenagers making the initial borrowing decisions — to wrap their heads around this possibility when the shortfall is 40 or 50 years away. The whole world is telling them that they should go to college, and they should. But taking on debt to do so leads hundreds of thousands of new graduates each year to forgo saving money for years afterward. The long-term cost ought to be part of the bigger conversation.
Here’s how the cost of delaying savings would break down, according to a scenario that Vanguard helped me prepare and compute. Assume that two people graduate from college in the same year and get a job earning the same $45,000 salary, with equal raises over time. (Let’s stop here to allow for the fact that plenty of people take on debt without ever graduating, and plenty more get their degrees but end up in low-paying jobs that don’t require one.)
Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.