An interviewwith Rob Scheinerman, president, AIG Retirement Services, about theresults of his company's study that assessed the financialcapabilities and challenges of 30,000 current college students.(Photo: Shutterstock)

Millennials, and their Generation Z successors, are on shaky financial ground.

They are hammered with school and credit card debt and are often under-employed. They don'tmarry, have kids, or buy houses at the rates of previousgenerations, facts cited to prove just how disadvantaged today'scollege students and younger adults are.

Data supporting that narrative began trickling from thefinancial services industry within the past decade and has by nowreached critical mass, with presidential candidates bemoaning thefinancial plight of young Americans from political hustings andpledging, in some cases, to forgive what will soon be more than $2trillion in total education debt and guarantees of free college forthe country.

But do today's college students and early professionals reallyhave it that bad? Or is their financial death-by-a-thousand cutsstory an over-cooked tale driven by political and marketingmotivations?

For millions of college students and young professionals, thenarrative is unfortunately true, says Rob Scheinerman, president,AIG Retirement Services.

“They are facing a different set of challenges,” Scheinermantold BenefitsPRO. “What is provably true is that the role of debtin financing education is massively more significant than withprevious generations. In the past, if the cost of a collegeeducation was out of reach, you didn't go.”

But in modern America, if there is a will to go to college,there's a way to finance it.

“It's a 'we should do what it takes' mentality,” explainedScheinerman, who underscored the role higher education plays indeveloping a more skilled and agile workforce. “When young peopleare making the decision to finance their education, they are at anenthusiastic point in life. It's hard to tell a 16 year-old whatthe financial implications of their decisions are.”

Parents too are often eager to see their children pursue acollege education. About 2.8 million Americans over age 60 havemore than $67 billion in outstanding student loan debt, which isexplained by parents co-signing for their kids' notes.

AIG recently sponsored a massive study, conducted by EVERFI, aprovider of financial literacy education, which assessed thefinancial capabilities and challenges of 30,000 current collegestudents enrolled at more than 440 institutions.

“When I looked at the study results at first blush I thought,'wow, this is depressing,'” said Scheinerman.

Nearly 60 percent of the sample have or plan to take out loansto finance college. About 20 percent of students enrolled atfour-year colleges plan to carry more than $50,000 in debt atgraduation. Another 18 percent will owe between $20,000 and$30,000.

Only 65 percent of debt-holding respondents said they plan topay off their loans in time and in full, down substantially from2012, when the survey found 88 percent planned to fully honor theirdebt obligations.

“Regardless of how they got there, the fact is they have thisdebt,” said Scheinerman. “That has implications for employers andwhat they need to do for their new employees to hire and retain thebest talent.”

But his dour initial reaction to the numbers is buoyed by thepotential for AIG's study, and others', to motivate action by youngpeople and their parents, new polices on how to more efficientlyfinance higher education, and action from employers to balance theneed for their young workers to service their debt and developsound savings practices.

“We're starting to see parents push back a bit,” saidScheinerman. More younger Americans are opting for two-yearcolleges. Debt levels at those institutions are dramatically lower,the study shows.

Beyond pledges for free higher education and debt forgiveness,which could be chalked up to political season electioneering, thereare more achievable policy approaches being considered on CapitolHill.

Scheinerman cited the Retirement Parity for Student Loans Act, abill first introduced by Sen. Ron Wyden, D-OR, ranking member ofthe Senate Finance Committee. It would allow employers to makematching contributions to retirement savings plans as if studentloan payments were salary reduction contributions.

Other ideas that would pair payment obligations to youngworkers' salaries are emerging in policy circles. And Scheinermanalso noted some not-for profits' incentives to offer debt relief toprospective young hires. AIG's recordkeeping business focuses onthe non-profit 403(b) market.

But the role of financial education, in college, high school andperhaps earlier, could be the one policy initiative that couldprotect future generations from amassing dysfunctional debtloads.

“We know that only 35 percent of the study's respondents hadsome financial education in high school,” said Scheinerman. “Thateducation is critical. What we want is to do the best we can as asociety to educate people from an early age to have a plan, anddevelop positive habits around savings and living within yourmeans.”

Those that did take a personal finance course in high schoolwere a bit less likely to worry about their debts, and less likelyto have credit card debt, according to the study. The percentage ofstudents that use credit cards increased from 28 percent in 2012 to46 percent today. And those with more than one card increased from25 percent to 45 percent.

The new reality for the retirement services industry, and theiremployer clients, is that retirement savings and student loan debthave become inextricably linked, said Scheinerman.

“People didn't get into debt in one fell swoop,” he said. “Themore you can save when you are 25, the better off you will be at55. The power of compounding interest goes in both directions. Theidea is to get young people motivated when they see their savingsgrow.”

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