College students are heading home after graduation. As a result, their parents’ long-term finances may be at risk.
A new study today by Corebridge Financial and international technology company EVERFI found more students are relying on family support as they graduate college and enter the workforce. Almost half of college students (45%)—an increase from 30% last year—expect to rely on their family’s assistance until they can provide for themselves. Nearly one-third (33%) anticipate moving back in with their folks.
While students save on rent money, the move can end up jeopardizing a parent or guardian’s long-term savings, contingent on the amount of expenses. “Depending on the situation, it can impact retirement planning, especially as this is money that could have been invested and grown,” said Scott Ramey, executive vice president, Retirement Services at Corebridge Financial, in an interview with 401K Specialist.
Moving back home isn’t a new phenomenon. The COVID-19 pandemic uprooted many into moving back to their parents’ place, rather than living with a roommate, a partner, or alone. In a study by the Pew Research Center, half of adults ages 18 to 29 surveyed said they were living with one or both of their parents.
But hosting children back home can financially squeeze savings for some parents. A survey by financial services firm Thrivent reported that 35% of parents with adult children at home have compromised their own retirement savings to financially support their children. Additionally, only 21% of parents said they could provide full financial support to their adult child if they move back home.
Just because an adult child moves back home doesn’t mean that parents need to jeopardize their retirement. In fact, there are ways to avoid dipping into those long-term savings, said Ramey. “Adult children can help with grocery expenses, household costs, etc., and can also help with chores that the parents have typically outsourced with a third-party, in order to help with costs,” he added. “We think about this as an opportunity for students and parents to create a budget together.”
Financial anxiety grows amid student debt concerns
The Corebridge Financial and EVERFI study also found more students are leaving college with increased apprehensions on their student loans. Forty-four percent of those surveyed reported feeling stressed about the amount of student loans they will be taking out, compared to 40% just last year.
College students who expect to make their student loan payments on time fell to 69%, a drop from 77% last year. Those who expect to pay off their student loans in full decreased to 67%, from 75% the year before.
Students are also looking for information to help them handle their student loans. When asked what would help them feel less stressed and better prepared to pay off their student loans, the top three choices were easy access to their outstanding balance (38%), a better understanding of loan repayment options (36%) and having a plan to pay off loans (36%).
The findings come as the future of student loan debt repayment remains uncertain. Last week, President Joe Biden’s student loan relief plan was paused after a U.S. District judge vacated the program, blocking relief for tens of millions of borrowers.
Eyes are now on pending SECURE 2.0 legislation, which if passed, would allow employers to match 401k contributions to student loan debt payments.
SEE ALSO:
Student Loan Relief in Limbo After Judge Vacates Biden’s Program
SECURE 2.0 Update: Where It Stands, What’s Likely to be Included