The Center for Retirement Research found that student debtors are saving much less for retirement when compared to their debt-free peers.
Student loan debt receives a lot of media attention and for good reason; outstanding student debt has tripled in the last 13 years. Studies have shown that this can leave many college graduates struggling financially and unable to meet certain milestones, like purchasing a home or starting a family.
Now, a recent study by the Center for Retirement Research looks at how student loan debt affects retirement savings. Having student loan debt doesn’t seem to stop people from saving for retirement in a 401(k), but it can take those borrowers longer to accumulate any retirement savings, which is consistent with a previous survey. Thirty-year-old graduates with student loan debt saved 50 percent less than their peers without debt.
This stayed true for all borrowers, regardless of the actual amount they borrowed to pay for school. The amount of retirement savings stayed fairly consistent across the board, whether they had high or low outstanding loan balances.
By age 30, graduates in the 25th, 50th, and 75th percentiles of student loan debt all had saved between $9,000 to $9,300 toward retirement. On the other hand, graduates with no student loan debt had saved $18,200. According to the study, this finding demonstrates the impact even small amounts of student loan debt can have on retirement savings.
There was also a correlation between a graduate’s student loan debt and their earning potential. Thirty-year-old graduates with student loan debt earned an average of $43,894; graduates without student loan debt earned an average of $47,931. And graduates with student loan debt are more likely to fall behind on their student loan payments and are at higher risk for bankruptcy.
However, the study did find a significant difference among non-graduates with student loan debt. Non-graduates in the 25th percentile had saved $5,100 toward retirement. Non-graduates in the highest debt bracket saved $2,200 toward retirement.
The data was provided by the National Longitudinal Survey of Youth. The study recommended that further research be conducted to examine whether the amount of student loan debt affects a borrower’s financial decisions.