Many Higher Ed Employees Are Debt Constrained, Cannot Adequately Address Other Financial Needs

20% of debt-constrained savers worry they're not saving enough

NEW YORK, Oct. 24, 2024 /PRNewswire/ -- Despite recent relief from high inflation, a new report from TIAA Institute and CUPA-HR found that many employees in higher education are struggling to balance debt with short-term and long-term financial goals like saving for retirement.

The report, Financial Well-being and Retirement Readiness in Higher Education, revealed the significant challenge that debt poses for financial well-being among the higher ed workforce especially post-pandemic as higher ed employees are earning less now than before the pandemic when adjusted for inflation.

According to the report, 80% of full-time college and university employees carry debt, and more than 70% say their debt and debt payments prevent them from adequately addressing other financial priorities. One-third of those significantly debt constrained find it difficult to make ends meet compared to only 4% of borrowers who are not debt constrained.

"Higher ed employees earn less today than before the COVID-19 pandemic after adjusting for inflation," said Melissa Fuesting, CUPA-HR. "At the same time, many are debt constrained. Both are factors that would squeeze household finances in the near term, making it more challenging to make ends meet."

How Debt Impacts Everyday Financial Wellbeing

Debt constraint is even more common among borrowers with student loan debt. Almost one-quarter (23%) of higher ed employees have outstanding student loans, and over 80% of them report being debt constrained, 36% significantly so.

Debt constraint could readily manifest in an inability to save for other financial obligations, including emergency funds, home purchases, or retirement. In fact, one-third (34%) of higher ed employees who are significantly debt constrained lack emergency savings that could cover three months of living expenses.

"Higher education employees who carry debt, and especially those carrying student loan debt, are struggling to balance their short-term personal financial needs against their longer-term financial goals," said Surya Kolluri, Head of TIAA Institute. "The results of our survey suggest that professional advice can help relieve some of the stress that comes with financial insecurity and can improve confidence."

Debt and retirement readiness

Despite financial challenges, researchers say the vast majority of full-time higher ed employees (93%) are currently saving for retirement. Two-thirds (65%) are saving through an employment-based retirement savings plan, such as a 403(b) plan, and an additional 27% are saving on their own. However, debt still matters in the context of retirement savings. Over 40% of non-savers are significantly debt-constrained, while 20% of debt-constrained savers are not confident they're saving an adequate amount.

Beyond adequate savings, retirement readiness also requires planning for the conversion of savings to income during retirement. However, only 30% of retirement savers have given this a lot of thought. One-quarter of savers report they'll definitely annuitize some of their savings in retirement.

"Annuitization directly addresses the highest financial priorities for retirement among higher ed employees, so not intending to annuitize represents a planning disconnect," said Paul Yakoboski, Senior Economist at TIAA Institute. "A fixed annuity provides stable income that is guaranteed* to last for life, including the life of a spouse or partner."

About the TIAA Institute

The TIAA Institute is a think-tank within TIAA, conducting cutting-edge research in the areas of financial literacy and longevity literacy, lifetime income, retirement plan design and behavioral finance in the context of retirement. The Institute provides consulting services for higher education and the broader nonprofit sector. For more information, visit www.tiaainstitute.org.

About TIAA

TIAA is a leading provider of secure retirements and outcome-focused investment solutions to millions of people and thousands of institutions. It is the #1 not-for-profit retirement market provider¹, paid more than $5.7 billion in lifetime income to retired clients in 2023 and has $1.4 trillion in assets under management (as of 9/30/2024)².

About CUPA-HR

CUPA-HR is the recognized authority on compensation surveys for higher education, with its salary surveys designed by higher ed HR professionals for higher ed HR professionals and other campus leaders. CUPA-HR has been collecting data on the higher ed workforce for more than 50 years, and we maintain one of the largest workforce databases in existence. Learn more about CUPA-HR.

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1. As of June 3, 2024. Based on data in PLANSPONSOR's 2024 DC Recordkeeping Survey, #1 by total 403(b) assets and #1 by 403(b) ERISA plans.

2. As of September 30, 2024, assets under management across Nuveen Investments affiliates and TIAA investment management teams are $1,400 billion.

*Any guarantees are backed by the claims-paying ability of the issuing company.  Guarantees of fixed monthly payments are only associated with fixed annuities.

This material is for informational or educational purposes only and is not fiduciary investment advice, or a securities, investment strategy, or insurance product recommendation. This material does not consider an individual's own objectives or circumstances which should be the basis of any investment decision.

TIAA Institute is a division of Teachers Insurance and Annuity Association of America (TIAA), New York, NY.

©2024 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, New York, NY

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SOURCE TIAA Institute