Employees who are making payments on student loan debt are contributing less to retirement savings plans, creating a shortfall that can add up over the career of a participant.

A report published by the Employee Benefit Research Institute and J.P. Morgan Asset Management found student loan debt payments have a significant impact on 401(k) contributions and account balances. The organizations are conducting ongoing research to understand how various financial factors impact employees' retirement preparations. Using recordkeeper and banking data, the study tracked whether retirement plan contributions among active participants changed when student loan payments started or stopped.

The study found that making student loan debt payments significantly negatively impacted the average employee contribution rate and account balance. For those who had payments starting after the beginning of the three-year study, 25.3% reduced their contribution rates by more than 1 percentage point. Of the participants who were making student loan debt payments at the beginning of the study period and then stopped, 31.6% increased their 401(k) contribution rate by at least one percentage point.