How Student Loans Impact Retirement Savings and Income

How Student Loans Impact Retirement Savings and Income

| September 28, 2017

Two recent studies examined the impact of student loans on retirement savings and income for Americans in two very different life stages: early savers and individuals in or approaching retirement.

A study from the Center for Retirement Research at Boston College on participation in an employer-sponsored retirement plan and retirement assets as of age 30 did not find a statistically significant correlation between retirement plan participation and student loan debt. Although student loan debt negatively impacts workers’ overall financial wellbeing, preliminary results show they do not actually reduce their retirement savings much to compensate. Moreover, workers with large loan balances were actually more likely to accept a retirement plan if offered.

Further, the study found limited evidence that those with bachelor’s degrees have less retirement savings at age 30; in fact, the size of their student loan debts was unrelated to their retirement account balances.  The murky connection between student loan balances and retirement savings may indicate that the loans’ negative impacts are felt in other ways, i.e., reduced spending/consumption, or other decreases in net worth such as credit card debt.

Finally, the study’s authors noted that it is worth watching future cohorts to determine if a stronger correlation exists between student loan debt and retirement asset levels, particularly as individuals who accumulated additional debt move “toward financial and economic maturity.”

Student Loan Debt Saps Retirees’ Income

A report from the Government Accountability Office found that student loan debt continues to plague Americans into retirement, in particular, impacting their income.

The biggest issue for those in or approaching retirement — and anyone who defaults on federal student loans — is their Social Security benefits may be garnished to help recover the debt. According to the Government Accountability Office, Treasury Offset Program generated nearly 50% of defaulted student loan debt collections, including Social Security offsets, in fiscal year 2015. In fact, Social Security offsets rose from 36,000 to 173,000 in fiscal years 2002 through 2015.

Social Security offsets amounted to 15% of the benefit payment for around 44% of student loan debtors 50 and older — the maximum amount that can be withheld. One-third of older borrowers paid off their loans or received relief due to total and permanent disability (TPD) discharge, available only to those with a disability that’s not expected to improve. Most had held their loans for decades.

Both studies show that student loan debt could have a meaningful impact on the financial wellbeing of both early savers and retirees, and it’s important to monitor the effects, regardless of age or stage of life.



Tracking #1-615995 (Exp. 6/19)

 Find the full studies at  and

*For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.