Saving and Wealth Accumulation among Student Loan Borrowers

Abstract

Abstract Borrowing for education has increased rapidly in the past several decades, such that the majority of non-housing debt on US households’ balance sheets is now student loan debt. This chapter analyzes the implications of student loan borrowing for later-life economic wellbeing, with a focus on retirement preparation. It demonstrates that families holding student loan debt later in life have less savings than their similarly educated peers without such debt. However, these comparisons are misleading if the goal is to characterize the experience of the typical student borrower, as they fail to account for student borrowers who already paid off their debt. Strategies are developed to locate families that ever financed their education with student loans in two large datasets which enables us to draw more meaningful comparisons. The chapter finds that student loan borrowers roughly follow the earnings, saving, and wealth trajectories of other college-educated families into late-career ages and are much better off financially than those that did not attend college.