EBRI Press Release

New Research Study Finds Student Loan Debt Payments Having a Negative Impact on Average 401(k) Employee Contribution Rates and Account Balances

Feb 8, 2024 3  pages


A new research report published today by the Employee Benefit Research Institute (EBRI) and J.P. Morgan Asset Management found that making student loan debt payments was found to have negative impact on both the average 401(k) employee contribution rate and account balance.


The report, “Student Loans and Retirement Preparedness,” provides information on how student loan debt payments affect 401(k) contributions of those who are contributing and whether participants increase or decrease their contributions when their student loan payments status changes (payments end or start).  Provisions in SECURE 2.0 allow for many potential changes to 401(k) plans and financial wellbeing programs, including matching contributions to 401(k) plans from student loan debt payments. However, many benefit changes can result in additional expenses, and in some cases, these additional expenses might not result in the impact that was expected.

As a result, the research reviewed 401(k) plan recordkeeper data on balances and contributions of active participants linked with banking data from these same participants to see if they are making student loan payments. A three-year period was examined to determine if contribution changes resulted after stopping and starting payments and if student loan payments were made in prior years instead of just a one-year snapshot, which could miss participants who were making payments in the year(s) prior to an analysis year.

Highlights in the research reports include:

  • One-fifth of the participants had student loan payments in at least one of the three years of this study, while 12.1% had them in all three years. However, the likelihood of these participants having student loan payments was higher for those younger or with higher incomes and lower for those with longer tenures.
  • Among those with incomes less than $55,000, the average employee contribution rate of those making a student loan payment during the three-year period was 5.3% compared with 5.7% for those not making student loan payments. The difference is larger among those with incomes of $55,000 or more: 6.1% with payments vs. 7.3% without payments.
  • When looking at the ending balances by tenure, the average was lower for those who made student loan debt payments than for those who did not make these payments. The differences are particularly pronounced among the participants with incomes of $55,000 or more. For example, among those with tenures of more than 5 years to 12 years, the average balance for those who made payments was $86,109 vs. $107,687 for those who did not make payments.
  • Of the participants who were making student loan debt payments at the beginning of the study period and had stopped before the end of the study, 31.6% increased their contribution rate by at least one-percentage point after the payments had stopped. This share that increased was slightly higher for those with incomes less than $55,000 at 33.3% compared with 30.5% for those with incomes of $55,000 or more.
  • Making student loan debt payments was found to have statistically significant negative impact on both the average employee contribution rate and account balance at the end of the study when using regression analysis.

“The paying of student loan payments had a significant impact on the level of contributions of those contributing. However, some of the impact of the student loan payments appeared to be lessened by the design of the 401(k) plan such as automatic enrollment or employer contribution match levels as the median employee contribution rate for all participants studied was near the level of the maximum amount matched and/or common default rates in automatic enrollment plans,” explained Craig Copeland, director, Wealth Benefits Research, EBRI.

“Yet, many participants adjusted their contributions as their student loan debt obligations outside of the plan changed. Consequently, financial wellness programs can help in the contribution and debt payment decisions by considering the total finances of the participant. The payment status change can also be an important touch point in helping to improve the financial wellbeing of participants, as many appear to be making important financial decisions at this time and better information could improve outcomes,” said Sharon Carson, retirement strategist, J.P. Morgan Asset Management. 

The Employee Benefit Research Institute and J.P. Morgan Asset Management are conducting this study as part of an ongoing joint effort to deliver data-driven research to better understand how the financial factors faced by 401(k) plan participants outside of their 401(k) plan impact their retirement preparations.  Overall, the goal is to provide unique fact-based insights to help build a stronger retirement system by policymakers, plan sponsors and plan providers.

Single customer households who are ages 65 or younger in 2017 from the Chase data were matched with participants from the EBRI/ICI 401(k) Plan Database. These single customer household participants must have complete data in both datasets in each year from 2017-2019. The 401(k) data only include active participants.  The years of 2017-2019 were chosen since they are the most recent years before the suspension of student loan payments during the COVID-19 pandemic, which is expected to be closer to environment going forward. This results in 51,567 single customer household participants for the study’s analysis.

To view the complete report, “Student Loans and Retirement Preparedness,” visit https://www.ebri.org/student-loans-and-retirement.