Student Debt Reduces Retirement Savings by 45 Percent

A study by the Employee Benefit Research Institute (EBRI), commissioned by the financial-technology firm Candidly, reveals that workers with student debt fall behind in retirement savings early in their careers and rarely recover. The research shows that one-fifth of workers carry student loans, which leads to lower 401(k) contribution rates or total withdrawal from retirement plans.

By their 40s, indebted workers hold median account balances approximately 45% lower than those without student debt. This financial burden persists across all income levels and age groups, including workers over 50. Laurel Taylor, CEO of Candidly, noted that while college degrees may increase lifetime earnings, they often create a one- to 15-year gap in retirement savings that is difficult to overcome due to the loss of early compounding.

To address this gap, Candidly advocates for the universal adoption of employer matching for student-loan repayments under the Secure 2.0 Act. EBRI estimates that these policies could unlock more than $10 billion in potential value for borrowers, a figure that could rise to $20 billion if employees simultaneously increase their own contribution rates.