TIAA-MIT Agelab study finds student loan debt significantly impacts retirement savings, longevity planning and family relationships

One-quarter of those not saving for retirement cite student loans as the reason; Parents and grandparents borrowing for loved ones are hardest hit
 
NEW YORK July 30, 2019 – A large majority of American adults (84%) report that student loans are negatively impacting the amount they are able to save for retirement, according to new research sponsored by TIAA and conducted by the MIT AgeLab. Nearly three out of four (73%) borrowers report they are putting off maximizing their retirement savings, saying they expect to begin or increase their contributions once their student loans are paid off. Among those who are not saving for retirement at all, more than one quarter (26%) point to the need to pay off student loan debt as the reason.
 
The yearlong study, which explores the intersection of student loan debt, longevity planning and family dynamics, shows that life stage—and who the loans are being taken out for—plays a key role in the balancing act of paying off student debt and saving for retirement.

Borrowers of all ages, including parents and grandparents, are making financial sacrifices to repay student loans

Among 25- to 35-year-olds who are not saving for retirement, 39% say they are prioritizing student loan payments. Of the parents and grandparents taking out loans for children and grandchildren, 43% say they will increase retirement savings once the student loan is paid off.  In focus groups, women, in particular, described the struggle of sacrificing their own financial security in retirement in order to put their childrenfs education and wellbeing first.  
 
gTo be sure, getting a college degree remains one of the smartest investments a person can make in their financial future – but saving for retirement is equally important,h said Roger W. Ferguson, Jr., president and CEO of TIAA. gWe believe that advice and coaching are key to navigating what can seem like competing demands. TIAA has found that people who engage with qualified financial professionals are better equipped to make decisions about paying for education for themselves or a loved one without sacrificing their future financial security.h

Families struggle to discuss and understand student loans

Many borrowers also report that they did not discuss finances—including student loans—with their family. In fact, 40% of borrowers with loans for themselves and 36% of borrowers with loans for a child or grandchild report never speaking with their family about their student loans.
 
In many cases, family members arenft aware of the financial strains caused by student loans. Over half of borrowers with loans for themselves (51.4%) and nearly one-third of borrowers with loans for a child or grandchild (31%) report their family knew gnothingh or gvery littleh about their student loans.

Student loans place burdens on couples

According to the study, student loans are also impacting personal romantic relationships. The likelihood of loans affecting borrowersf romantic relationships varies with their loan amounts. Only 6% of borrowers with a loan amount of $9,999 or less report a negative effect on romantic relationships, compared to 34% of borrowers with an initial loan amount of $200,000 or more. 
 
Borrowers with higher initial loan amounts also report greater loan-related delays to traditional milestones.
 
 
The study also shows that unclear expectations and poor communication prior to repayment can spark conflict for couples. When the contribution amount was not clear from the beginning, borrowers were more likely to report ongoing conflict with their families or partners due to the student loans.
 
 
gWe have always known that longevity can be optimized by having access to retirement security and support from family,h said Joseph Coughlin, Director of the MIT AgeLab. gWhat we now know is that for borrowers across the age spectrum, student loan debt can create shocks to both.h 

Student loans impact how people perceive their financial preparedness  

The study also shows that student loan debt is limiting peoplefs confidence in their ability to meet their financial goals.
 
To boost financial confidence and preparedness, education is key. People want and need more financial education to understand and prepare for the impact of their student loan debt. The study reveals that:
 
 
When borrowers were asked what would help them most in their financial situation, earlier training about finances and money management were cited as the most potentially beneficial strategy for tackling student loan repayments.
 
gPolicymakers, employers, financial services companies and educational institutions all play an important role identifying and creating solutions,h Ferguson said. gEnsuring people fully understand their options and the impact of any loans they do take, along with innovative approaches to retirement plan design that enable employers to jumpstart peoplefs savings while theyfre paying down their debt, can help address the issue.h
 
Additional information regarding the study, including an executive summary, can be found here .

Study Methodology

The MIT AgeLab conducted a two-part mixed-methods study between February 2018 and April 2019. The first part consisted of small, in-person focus groups with 88 participants, in conjunction with pre-group and follow-up online questionnaires.
The second part of the study involved a larger online national survey of 1,874 participants. In both parts of the study, participants ranged in age from 25-75, and were currently contributing to student loan payments for their own and/or an immediate family memberfs higher education.  

About TIAA

With an award-winning 1 track record for consistent investment performance, TIAA (TIAA.org) is the leading provider of financial services in the academic, research, medical, cultural and government fields. TIAA has $1.1 trillion in assets under management (as of 6/30/2019 2) and offers a wide range of financial solutions, including investing, banking, advice and education, and retirement services.

About the MIT AgeLab

The MIT AgeLab was created in 1999 to invent new ideas and creatively translate technologies into practical solutions that improve the quality of life of older adults and those who care for them. The AgeLab applies consumer-centered systems thinking to understand the challenges and opportunities of longevity and emerging generational lifestyles to catalyze innovation across business markets.

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