Finance and Economics Discussion Series (FEDS)
April 2022
Saving and Wealth Accumulation among Student Loan Borrowers: Implications for Retirement Preparedness
Lisa Dettling, Sarena Goodman, and Sarah Reber
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 chapter 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.
DOI: https://doi.org/10.17016/FEDS.2022.019
PDF: Full Paper
Related Materials: Accessible materials (.zip)
Disclaimer: The economic research that is linked from this page represents the views of the authors and does not indicate concurrence either by other members of the Board's staff or by the Board of Governors. The economic research and their conclusions are often preliminary and are circulated to stimulate discussion and critical comment. The Board values having a staff that conducts research on a wide range of economic topics and that explores a diverse array of perspectives on those topics. The resulting conversations in academia, the economic policy community, and the broader public are important to sharpening our collective thinking.