Document Type
Working Paper
Date of this Version
8-2022
Abstract
Borrowing for education has increased rapidly in the past several decades, such that the majority of non-housing debt on US households’ balance sheets is now student loan debt. This paper analyzes the implications of student loan borrowing for later-life economic well-being, with a focus on retirement preparation. We demonstrate that families holding student loan debt later in life have less savings than their similarly educated peers without such debt. However, these comparisons are misleading if the goal is to characterize the experience of the typical student borrower, as they fail to account for student borrowers who already paid off their debt. We develop strategies to locate families that ever financed their education with student loans in two large datasets which enables us to draw more meaningful comparisons. We find that student loan borrowers roughly follow the earnings, saving, and wealth trajectories of other college-educated families into late-career ages and are much better off financially than those that did not attend college.
Keywords
student loan debt, retirement, savings
Working Paper Number
WP2022-18
Copyright/Permission Statement
All findings, interpretations, and conclusions of this paper represent the views of the authors and not those of the Federal Reserve Board, the Wharton School, or the Pension Research Council.
Acknowledgements
The authors thank John Sabelhaus and Alice Volz for generously sharing estimates of defined benefit plan asset values.
Date Posted: 16 August 2022