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Can Workers Tackle Student Loans and Retirement?

As this debt increases, research shows that less is saved for the long term. But employers, and lawmakers, are acting to help.

Student loan debt has become much more prevalent than it once was, with aggregate debt increasing by 400% from 2001 to 2016, according to the U.S. Federal Reserve. This reality coincides with the rapid transition away from defined-benefit plans to defined-contribution plans, particularly for younger workers, and it appears to be a drag on workers' ability to save for retirement. Aware of the reality, employers are beginning to deploy programs that allow workers to receive their 401(k) match by paying off their loans--which could help those with student loans simultaneously save for the future.

Researchers who have studied student loan debt find a strong association between higher levels of student debt and lower retirement savings. For example, the Employee Benefit Research Institute found that median defined-contribution retirement account balances were almost 40% lower for people who had student debt than those who did not. (This statistic only compares people with college degrees to each other; the gap narrows slightly as overall balances fall among those with some college but no degree.)