Debt throws most higher-ed workers financially off-balance, finds TIAA Institute research

A new report from TIAA Institute offers a sobering in-depth look on the growing financial strain higher education employees face due to debt.

The research, conducted in partnership with the College and University Professional Association for Human Resources, reveal that many full-time employees in the sector are struggling to balance debt with both short-term financial needs and long-term goals like saving for retirement, especially as inflation-adjusted earnings have not yet recovered to pre-pandemic levels.

According to the report titled Financial Well-being and Retirement Readiness in Higher Education, 80 percent of full-time higher ed employees carry some form of debt, with over 70 percent indicating that debt hampers their ability to meet other financial obligations. Notably, one-third of employees who are severely debt-constrained report difficulty in making ends meet, compared to just 4 percent of those less affected by debt.

“Higher ed employees earn less today than before the COVID-19 pandemic after adjusting for inflation,” Melissa Fuesting of CUPA-HR said in a statement. “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.”

Debt from student loans is particularly burdensome. Nearly one-quarter of higher ed employees hold student loan debt, and over 80 percent of them report feeling financially constrained by it. Among those most affected by debt, 34 percent lack an emergency fund capable of covering three months of living expenses.

Surya Kolluri, head of TIAA Institute, noted the broader impact of these financial challenges. “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,” Kolluri said. “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.”

Despite these hurdles, 93 percent of full-time employees in higher education are saving for retirement. However, for many debt-constrained savers, retirement readiness remains an issue. Over 40 percent of non-savers are significantly debt-constrained, while 20 percent of debt-constrained savers express doubts about saving enough for retirement.

Paul Yakoboski, senior economist at TIAA Institute, emphasized the importance of planning ahead with a retirement income strategy.

“A fixed annuity provides stable income that is guaranteed to last for life,” he said.

The survey found one-quarter of savers are definitely intending to annuitize some of their savings in retirement, but only 30 percent of employees saving for retirement have fully considered converting their savings into a reliable income stream.