Report Adds Fuel to the Fire on Effect of Student Loan Debt

Student loan debt has long been said to be a drag on retirement saving, and a just-released report adds fuel to the fire. 

Not only is student loan debt an immediate and long-term financial burden, but it also has a “statistically significant” effect on retirement accounts, says a new issue brief by the Employee Benefit Research Institute (EBRI)—and not in a good way. Researchers found that they hurt employee contributions as well as participants’ account balances. 

The findings are contained in “Student Loans and Retirement Preparedness,” a report by EBRI’s Craig Copeland, Director of Wealth Benefits Research, and J.P. Morgan Asset Management’s Michael Conrath, Chief Retirement Strategist and Head of the Retirement Insights Strategy Team; Sharon Carson, a retirement strategist on the Retirement Insights Strategy team; and Alex Nobile, Vice President, Retirement Insights. 

Copeland, Conrath, Carson, and Nobile looked at 401(k) plan recordkeeper data concerning active participants’ balances and contributions, linked with their banking data, to better understand how payments on that debt affect employees’ contributions their retirement accounts. 

Participants studied included both young and old, as well as a broad range of employee tenure. The data sample from JPMorgan Chase Bank came from households during the period 2016–2020 who use Chase as their primary bank. 

The researchers report that 20% of the study sample’s participants had student loan payments in at least one of the years of this study, and 12.1% made those payments in every year.

Age and Tenure

The researchers found that an individual’s age and the likelihood of that person having to make student loan payments are related. 

They found that the younger a participant was, the higher the likelihood that he or she would be making student loan debt payments. Interestingly, however, they also found that as job tenure—as well as income—increased, so did that likelihood. 


Copeland, Conrath, Carson, and Nobile found that making student loan payments hurt the percentage of income that participants devoted to making contributions to their retirement accounts—and income level exacerbated the effect. 

They found a 0.4 percentage point difference between the contribution level of those with incomes of under $55,000 who made student loan payments and those who were not—the average employee contribution rate for the former was 5.3%, while that of the latter was 5.7%. Among those who made more than $55,000 per year, those figures had a gap of 1.2 percentage points, ranging from 6.1% to 7.3% respectively. 

The researchers found that participants who stopped making payments during the study increased their contribution rates once they had fulfilled their loan obligations. One-third of those with annual incomes of up to $55,000 increased their contribution rate by at least 1 percentage point; 30.5% of those whose incomes exceeded $55,000 did so.  


Not surprisingly, Copeland, Conrath, Carson, and Nobile found that average retirement account balances were higher for participants who had not been making student loan payments than for those who had. And the effect was especially pronounced for those with incomes of $55,000 or more and who had tenure of more than 5 to 12 years—average balances were $107,687 for those who had not been making payments, and $86,109 for those who had. 

Action Steps 

Copeland, Conrath, Carson, and Nobile indicate that information and education can help mitigate the effect of student loan debt on participants’ retirement accounts. 

They suggest that if an employer better understands the impact of student loan debt and how participants respond as their debt payment status changes, it can provide better information on benefit decisions. The report also suggests that financial wellness programs can be fruitful as well.


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