How does Student Debt affect Early-Career Retirement Saving?

Matthew Rutledge, Geoffrey Sanzenbacher and Francis Vitagliano
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Francis Vitagliano: Center for Retirement Research at Boston College

No 1037, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: This paper examines the relationship between student loans and retirement saving by 30-year-old workers. Total outstanding student loan debt in the United States has quintupled since 2004. Rising student debt levels mean that young workers must reduce either their consumption or their saving. To what extent do these workers cut back on retirement saving? Existing studies have lacked adequate data or controls for studying this issue, especially for younger workers. This study uses the National Longitudinal Survey of Youth 1997 Cohort, and thus includes a large sample of young workers, and includes detailed controls including school quality, parental background, and the underlying ability of the college attendee. While the estimated relationship between student debt and participation in a retirement plan is small, bachelor’s degree-holders who have student loans do have significantly lower retirement assets at age 30 than those without loans. Interestingly, the actual size of the student loan does not seem to matter – those with student loans have lower retirement savings, but retirement wealth accumulation is similar for those with small loans and large loans.

Keywords: student debt; saving (search for similar items in EconPapers)
JEL-codes: G5 J32 (search for similar items in EconPapers)
Date: 2021-07-15
New Economics Papers: this item is included in nep-age
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Working Paper: How Does Student Debt Affect Early-Career Retirement Saving? (2016)
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