Student loan debt is hindering the amount of money workers can contribute to their 401(k)s and other retirement savings plans, according to the results of a three-year study by the Employee Benefit Research Institute and JP Morgan Asset Management.

The results ultimately could impact workers’ ability to pay for senior living or other long-term care needs in the future.

Having monthly student loan payments was shown to have a “statistically significant negative impact” on the average employee retirement account contribution rate and, consequently, account balances, at the end of the study period.

“However, some of the impact of the student loan payments appeared to be lessened by the design of the 401(k) plan such as automatic enrollment or employer contribution match levels as the median employee contribution rate for all participants studied was near the level of the maximum amount matched and/or common default rates in automatic enrollment plans,” Craig Copeland, director of wealth benefits research at EBRI, said in a news brief issued in conjunction with the report, which was released Thursday. 

One-fifth of the study participants said they had made student loan payments in at least one of the three years of the study; 12.1% had made loan payments in all three years. Younger people and employees with higher incomes were more likely to have student loan payments, according to the report, whereas those with longer tenures were less likely to have student loan payments.

“Among those with incomes less than $55,000, the average employee contribution rate of those making a student loan payment during the three-year period was 5.3% compared with 5.7% for those not making student loan payments,” according to the report. “The difference is larger among those with incomes of $55,000 or more: 6.1% with payments vs. 7.3% without payments.”

Ending retirement account balances after three years were, on average, lower for those who made student loan debt payments than for those who did not make those payments, the data show.

Some companies are tapping into provisions of the Consolidated Appropriations Act, which was signed into law in 2020 as part of pandemic relief efforts, the McKnight’s Business Daily previously has reported. Under the law, through 2025, employer-sponsored retirement plans can help with student loan debt by offering a retirement plan match based on a qualified student loan payment.

One provider recently told McKnight’s Senior Living that it is offering student debt repayment as an option to employees. Goodwin Living, a faith-based, not-for-profit organization in Alexandria, VA, is offering clinical staff members up to $5,250 annually in student loan repayment grants.