‘Crunched on Both Sides': Older Millennials Balance Student Loans, Retirement Saving and Kids' College Funds

As millennials begin to turn 40 in 2021, CNBC Make It has launched Middle-Aged Millennials, a series exploring how the oldest members of this generation have grown into adulthood amid the backdrop of the Great Recession and the Covid-19 pandemic, student loans, stagnant wages and rising costs of living.

Older millennials entered adulthood around the time of the 2008 financial crisis, which was followed by unique challenges like rising college costs and slow wage growth. The result: Millennials became the student debt generation. 

Now, as older millennials start families of their own, they are suffering through the aftermath. Not only are many still paying off their student debt, but they are also planning for their retirement as well as their children's education.

It's forcing them to make difficult decisions about their financial priorities: Due to student loan payments, for instance, 23% of older millennials have limited their retirement contributions, according to a recent survey of 1,000 U.S. adults ages 33 to 40. The survey, conducted by The Harris Poll on behalf of CNBC Make It, also found that 27% delayed buying a home and 24% cut back on building an emergency savings.

While it's not unusual at this stage of life to weigh your family's financial priorities, older millennials are being "crunched from both sides," says Cliff Robb, an associate professor at the University of Wisconsin, Madison, who studies financial decision-making.

Millennials have "got to plan for their own retirement, which is less and less secure with less and less safety nets for them. They've got to provide for their children's education, which is increasingly expensive, while they're still paying off their own education, usually," says Robb. "And they're having to pay for higher costs of raising those children in a marketplace that isn't rewarding them at the same level as it was in the past."

A double whammy

When much of the older cohort of millennials went to college in the early 2000s, "they were right on the cusp of this significant rise in costs for higher education," says Robb.

"It was less and less subsidized, and more and more you [would] use loans rather than grants and scholarships," Robb says. "The millennial generation took the brunt of that shift."

Now as many are still paying off those loans, they are also thinking about how to pay for their kids' education, and not wanting their kids to end up with the burden they had.

In fact, 77% percent of older millennials said they would put off their retirement to pay for their kids' education if they had to, according to the Harris/CNBC Make It poll.

Tanya Wells, 42, and her husband, Jeremy, 41, know that they will likely need to delay retirement as they pay off their student loans and prepare to take on more debt for their two children, ages 15 and 17, to go to college.

The Wellses went to college later in life, graduating in 2017 with $275,000 in student loans.

Though they are technically on the border between millennial and Generation X, the Wellses' experience represents the impact this crunch has had on many older millennials. "We have this mounting amount of college debt and now both of our kids are in high school, so they're getting ready to go to college as well. We're thinking about how to juggle that and the idea of retirement," says Tanya. 

She says she plans to take out student loans herself to pay for her kids' college educations.

Christopher "Topher" Flamini, 33, puts $100 a month in a Roth IRA to save for his 20-week-old daughter's education.

Flamini graduated from Temple University in 2010 with roughly $45,000 in public and private loans but prioritized paying them off as quickly as he could.

"My average payment per month was somewhere around $500 or $600 per month," he says. "I remember graduating and being like, what am I going to do?"

Flamini worked at Subway for just over $10 an hour right out of college, but in 2011 he got a health- care data-entry job that allowed him to work his way up and make steady payments on his loans.

He now owes about $7,300. His wife, Nicole, does not have any student loans.

"It's really been a journey, and I look forward to trying to minimize student loans for my daughter," he says.

Juggling financial planning amid slow wage growth and fewer safety nets

On top of student loan debt, older millennials were just beginning their professional careers when the Great Recession hit, which will likely have negative consequences on long-term earnings. 

And more broadly, millennials have endured some of the most sluggish wage growth in U.S. history.

As the cost of living has risen, "we haven't seen any fantastic wage growth" since millennials entered the workforce, says Robb. "We've seen more wage stagnation. So individuals were not only paying more for their higher education, but they're not being rewarded by it as much as we've seen historically."

Robb also stresses that older millennials may not have the same social safety nets as previous generations. Social Security reserves could be exhausted by 2035, for example.

"You cannot count on Social Security to be at the same level your parents or your grandparents received," he says. "That means more weight on personal retirement savings. Like, if I'm not doing it, I'm probably not going to have enough in retirement. Plus, employer pensions have gotten less attractive because employers switched to defined contributions, away from defined benefits."

These realities are the reason the Wellses enrolled in college for the first time in their 30s — to boost their earning potential.

In 2008, Tanya Wells lost her job working in logistics and Jeremy lost his job working in construction. They depleted their savings and 401(k)s to survive.

"We never wanted to go through that again. We decided to recreate ourselves," Wells says. "We realized that the debt to go to college was going to be immense, but we also realized that the outcome was going to be worth the sacrifice."

In 2017, Wells graduated with her bachelor's from the University of Virginia and today earns roughly $60,000 per year as a program coordinator at Duke University Hospital. Jeremy is in the second year of his medical residency and earns approximately $50,000 — though he could soon make much more.

"It feels good that we have some job security," Tanya says. But with six-figure loans, two kids and a late start, it hasn't secured their retirement. And Wells does not expect to ever receive Social Security benefits.

"We went through all this to make sure that our family, from here on out, will never have to struggle with poverty," says Wells. "And so we are going to work until we can no longer work."

For Flamini, he knows his ability to continually increase his income has been key to his financial planning. He currently earns over $90,000 a year, which in addition to saving for his daughter's education has also allowed him to save for his retirement. His wife makes roughly $70,000 per year as a payment accuracy specialist in the health-care industry.

"Early on, [student loans] certainly limited the retirement contribution amount I could afford paycheck to paycheck," he says. "But over the years, it has not impacted my ability to save for retirement overall. I've always prioritized saving for an emergency fund and retirement. On top of that, I've been fortunate to have grown my income year over year as a result of new jobs and wage increases, which opened the door for more retirement contributions."

Though proud to have paid off most of his own loans, Flamini supports making education more affordable for the next generation.

"While sometimes student debt is reasonable, the level that a lot of us had was just so excessive, and it really makes life hard for some people. I'm very grateful for my experience because I was lucky and fortunate enough to handle it, but that's not everybody," he says. "There's just got to be a better way for us as a country."

Millennials are "part of this struggling generation that just didn't have the opportunities of other generations before us because we've always been underwater," says Wells. "But we went through all this to make sure that our family from here on out will never have to struggle."

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