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Report estimates 401(k) loan defaults at $37 billion annually

The recession, job loss, death and disability have pushed 401(k) loan defaults to about $37 billion a year, which has played havoc with the industry.

By Paula Aven Gladych | Updated on July 17, 2012

People default on loans they have taken out from their 401(k) plans all the time, and those numbers have been increasing since the recession started in 2008—to the tune of $37 billion per year, according to a new report by Navigant Economics.

“401(k) Loan Defaults: How Big is the Leakage and What Can Policymakers do to Preserve Americans’ Nest Eggs?” found that as of 2009, between 89 and 95 percent of 401(k) participants belonged to a plan offering loans and between 20 and 28 percent of those had a loan outstanding at some point in the past three years.

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