Kelton Corcoran is a senior content marketing specialist at NaviPlan, the financial planning technology provider of choice for more than 140,000 financial professionals.
Being a recent college graduate, I deal firsthand with the major student loan debt crisis and the large amount of concern it brings to millennials across the country. We are just entering the workforce and are making more money than we ever have before in our lifetime.
However, many millennials still do not fully understand what their financial future looks like. This is concerning as many financial decisions we make early on will drastically effect our future financial well-being. So how can we better understand? How bad really is our debt? Why would an advisor want to help me – I cannot afford to pay them?
Where the student loan crisis is today
The average class of 2019 graduate borrowing for their student loans leaves with $29,000 in student loan debt – this is an 18 percent increase from those graduating in 2008. How are graduates supposed to start thinking about purchasing a home and saving for retirement with this major burden hanging over them, considering many of them do not even fully understand what this debt means?
According to a survey of 777 college campuses in the U.S., 63 percent of students reported that they did not look at the average amount of student loans before committing to a college. Further, 30 percent said the cost of college was at least $10,000 more than they expected and 16 percent said they are not confident they will be able to pay back their student loans.
Student debt is clearly a major crisis to millennials across the country, but is the real issue the actual debt or is it the lack of education and understanding? As I mentioned before, the average student debt is rising and it does not seem to be slowing down. So, the best way to deal with this crisis is to provide a better understanding of what the debt means one’s financial future.
Assisting millennials now can lead to life-long clients
This is where it is vital for financial advisors to step in. College graduates need help understanding their options, as 14 percent said they do not understand that when they repay loans, they will pay back more than they borrowed. How can you expect a recent grad to lower their lifestyle expenses when they do not fully understand why they need to do so?
Millennials need advisors to step in at one of the most important stages of their life because these decisions will drastically effect the rest of their financial life. Giving millennials appropriate advice early on when they need it most is the perfect time for advisors to start building a trusting, life-long relationship.
Advisors have the opportunity to shape these young adults’ futures – they need help not only understanding college debt, but also understanding their long-term goals (i.e., retirement or purchasing that first home). Millennials need and advisor to assist in putting a plan in place so they can start taking control of their financial well-being.
Many advisors are also seeking a way to attract millennials, and this is it. Sure, recent grads may not bring in the most revenue right now. However, as an advisor, you have the opportunity to create financially healthy habits in young adults that will help you create life-long relationships which will ultimately increase retention and grow your assets under management over time.