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Volume 10, Issue 1

Student Loan Debt May Be Interfering with Retirement Saving

In addition to representing a drain on their short-term finances, workers who are paying off student loans may feel the burden of these debts into their retirement years, the results of an annual survey conducted by human resources consultancy Aon Hewitt indicates.

The survey of more than 2,007 U.S. workers conducted from May 24 to June 3, 2016 found that 28% of respondents currently have an outstanding student loan, and that not all of these workers are young. The findings showed that 44% of the millennials (born 1979-1996), 26% of the Gen Xers (born 1965-1978), and 13% of the baby boomers (born 1946-1964) surveyed have outstanding student loans; and that roughly half of these respondents are making at least $3,000 in loan repayments each year.

The results further suggested that carrying student loan debt can have a long-term impact on workers' financial future: while the survey respondents with student loans reported participating in employer-provided retirement plans at a rate that is only slightly lower than that of workers without loans (71% compared to 77%), more than half (51%) of the respondents with student loans said they are contributing no more than 5% of their pay to the plan. Researchers warned that saving less than 6% of pay can significantly affect retirement readiness, especially if employees are missing out on full company matching contributions.

Moreover, the survey found that employees with outstanding student loans are more pessimistic about their financial wellbeing than those without these debts. Of the respondents with student loans, 51% said that debt is ruining their quality of life, compared to 28% of those without loans; 54% indicated that they spend time at work dealing with financial issues, compared to 47% of those without student loans; 31% said they are worried about paying their bills, whereas only 20% of respondents without loans share this concern; 56% said they are concerned about saving for the future, compared to 41% of those without loans; and just 27% said they are financially comfortable, compared to 43% of those without loans.

Yet relative to the employees surveyed in 2015, a greater share of all of the workers surveyed in 2016 said they feel in control of their financial future (75% compared to 73% in 2015), and even more describe themselves as financially savvy (72% compared to 65% in 2015). Researchers pointed out that these positive perceptions continue to be higher among men than women, and higher among millennials than among other generations. However, despite describing themselves as financially savvy or feeling in control, more respondents in 2016 indicated that financial matters, including the idea of approaching an advisor, intimidate them; and that debt is ruining their quality of life.

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