Student loans are again making headlines, and October marks the resumption of payments for borrowers after a lengthy COVID-related hiatus, a politically controversial issue affecting over 45 million Americans.
One would think it would mainly impact younger workers, yet “even seasoned employees are experiencing significant financial pressures due to the resumption of payments,” according to a new survey from the Nationwide Retirement Institute.
It’s backed by a separate survey from the National Institute on Retirement Security (NIRS) that finds the average amount of student loan debt held by Gen Xers is still $40,000.
Overall, two-thirds of employees say student loan repayments will derail their retirement plans, and Nationwide found that employees aged 45 and over with student debt have or are considering taking several steps to manage upcoming repayments. More specifically:
- 29% plan to adjust their retirement plan contributions to keep up with their student loan payments. 18% have already adjusted their retirement plan contributions.
- 49% are reconsidering the feasibility of their retirement goals in light of their student loan debt.
- 59% are considering additional sources of income or side gigs to offset the financial strain caused by student loan payments and maintain their retirement savings contributions.
According to U.S. Census data, there are 140 million Americans ages 45 or older. With 12% of this group having student loans, there is a potential for nearly 17 million older Americans to make financial decisions because of student loan payment resumption.
“It’s impossible to ignore the long-term financial impact student loan repayments can have on employees across all generations,” Eric Stevenson, President of Nationwide Retirement Solutions, said in a statement. “The good news is SECURE 2.0 Act now allows employers to provide matching retirement plan contributions based on the amount of an employee’s student debt repayments.”
Employees are interested in predictable sources of income in retirement, Nationwide added.
Nearly three-fourths (73%) of employees aged 45 and over who participate in 401(k) plans wish they were offered a pension-like income stream within their employer-sponsored plan—such as a guaranteed lifetime income investment option, Nationwide added.
Additionally, when asked what would increase their confidence in their retirement plan and financial investments, 55% of respondents said guaranteed income options—the top response selected.
