An interview with Rob Scheinerman, president, AIG Retirement Services, about the results of his company's study that assessed the financial capabilities 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't marry, have kids, or buy houses at the rates of previous generations, facts cited to prove just how disadvantaged today's college students and younger adults are.

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

But do today's college students and early professionals really have it that bad? Or is their financial death-by-a-thousand cuts story an over-cooked tale driven by political and marketing motivations?

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

“They are facing a different set of challenges,” Scheinerman told BenefitsPRO. “What is provably true is that the role of debt in financing education is massively more significant than with previous generations. In the past, if the cost of a college education 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,” explained Scheinerman, who underscored the role higher education plays in developing a more skilled and agile workforce. “When young people are making the decision to finance their education, they are at an enthusiastic point in life. It's hard to tell a 16 year-old what the financial implications of their decisions are.”

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

AIG recently sponsored a massive study, conducted by EVERFI, a provider of financial literacy education, which assessed the financial capabilities and challenges of 30,000 current college students 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 loans to finance college. About 20 percent of students enrolled at four-year colleges plan to carry more than $50,000 in debt at graduation. Another 18 percent will owe between $20,000 and $30,000.

Only 65 percent of debt-holding respondents said they plan to pay off their loans in time and in full, down substantially from 2012, when the survey found 88 percent planned to fully honor their debt obligations.

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

But his dour initial reaction to the numbers is buoyed by the potential for AIG's study, and others', to motivate action by young people and their parents, new polices on how to more efficiently finance higher education, and action from employers to balance the need for their young workers to service their debt and develop sound savings practices.

“We're starting to see parents push back a bit,” said Scheinerman. More younger Americans are opting for two-year colleges. 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, there are more achievable policy approaches being considered on Capitol Hill.

Scheinerman cited the Retirement Parity for Student Loans Act, a bill first introduced by Sen. Ron Wyden, D-OR, ranking member of the Senate Finance Committee. It would allow employers to make matching contributions to retirement savings plans as if student loan payments were salary reduction contributions.

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

But the role of financial education, in college, high school and perhaps earlier, could be the one policy initiative that could protect future generations from amassing dysfunctional debt loads.

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

Those that did take a personal finance course in high school were a bit less likely to worry about their debts, and less likely to have credit card debt, according to the study. The percentage of students that use credit cards increased from 28 percent in 2012 to 46 percent today. And those with more than one card increased from 25 percent to 45 percent.

The new reality for the retirement services industry, and their employer clients, is that retirement savings and student loan debt have become inextricably linked, said Scheinerman.

“People didn't get into debt in one fell swoop,” he said. “The more you can save when you are 25, the better off you will be at 55. The power of compounding interest goes in both directions. The idea is to get young people motivated when they see their savings grow.”

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