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How does Student Debt affect Early-Career Retirement Saving?

Author

Listed:
  • Matthew S. Rutledge

    (Boston College
    Center for Retirement Research at Boston College)

  • Geoffrey Sanzenbacher

    (Boston College)

  • Francis M. Vitagliano

    (Center for Retirement Research at Boston College)

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.

Suggested Citation

  • Matthew S. Rutledge & Geoffrey Sanzenbacher & Francis M. Vitagliano, 2021. "How does Student Debt affect Early-Career Retirement Saving?," Boston College Working Papers in Economics 1037, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:1037
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    References listed on IDEAS

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    More about this item

    Keywords

    student debt; saving;

    JEL classification:

    • G5 - Financial Economics - - Household Finance
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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