When people with student debt try to save for retirement, they fall behind early and never catch up

By Beth Pinsker

If all employers matched debt payments, workers would save more than $10 billion

Paying off student loans leaves workers behind on retirement.

A new study paints a harrowing picture of what happens over time to the 401(k) retirement savings of workers who are paying off student loans: They fall behind early and never catch up.

One-fifth of workers currently carry student loans, according to a new report from the Employee Benefit Research Institute (EBRI) in a study commissioned by Candidly, a financial-technology firm specializing in student-debt issues. Workers with this debt were more likely to drop out of 401(k) plans or contribute less if they stayed enrolled.

The research comes as student debt remains a persistent burden across the U.S. population, with $1.66 trillion in outstanding loans. This issue spans all age groups, incomes and tenures of employees. Although the largest group of workers with student loans is between ages 29 and 34, there were still a significant number of workers over 50 either paying off their own debt or PLUS loans for their children. Some 8% of workers ages 64 to 69 still were carrying student debt. In terms of income, even 9% of those earning $250,000 were paying student loans.

Most of workers with student debt were contributing less than 6%, with nearly 40% contributing less than 3%. The gulf between contribution rates of those paying loans and those without debt widened with age. For younger workers ages 25 to 29, the contribution rates for those with student debt were 7.4% lower than the unindebted cohort. That percentage difference was 14.7% lower for those ages 50 to 54.

Even after paying off the debt, the effects lingered. Using data that synced government reports with credit-bureau data, EBRI was able to "follow" the same group of participants over a five-year time span and see how the effects of this slow savings start affected the groups. The news was grim: By the time the indebted workers reached their 40s, their median account balances were about 45% less than those who didn't borrow for higher education.

"It really encapsulates everything," said Craig Copeland, director of wealth research at EBRI, who wrote the report. "Over time, that's where you see where that big difference happens."

Matching student-loan repayments

Being able to quantify the lifelong impact of student debt could have an impact on how Americans think about the "return on investment" of borrowing for higher education. A college degree may lead to greater lifetime earnings in some professions, but what about the rest of the wealth picture?

"That's about earning; what's not part of that equation is wealth and accumulation," said Laurel Taylor, founder and CEO of Candidly. "It's so hard to make up for the compounding effect early in your career. Your lifetime earnings might increase with a college degree, but what do we do about this one- to 15- year gap in retirement savings?"

One solution Candidly supports is for more employers to offer matching 401(k) contributions for student-loan repayment, as allowed by the Secure 2.0 Act. With this benefit, companies are able to put matching retirement funds into a worker's account, even if the worker isn't contributing but is paying back student loans instead. About 42% of U.S. companies currently offer this benefit, according to a 2025 EBRI report.

The new EBRI study found that more than $10 billion "in potential value" could be available for student-loan borrowers if U.S. companies universally adopted such matching policies. Up to $20 billion or more could be on the table if employees also increased their contribution rates at the same time.

"As employers think about wellness and wealth, they should see that student debt affects all groups," said Taylor. "With that as a backdrop, offering matching on student loans also incentivizes workers to pay loans and helps avoid a drop of credit score and fees if they don't."

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-Beth Pinsker

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09-15-26 0918ET