Borrowing to Save? The Impact of Automatic Enrollment on Debt

John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian, William L. Skimmyhorn

NBER Working Paper No. 25876
Issued in May 2019, Revised in July 2019
NBER Program(s):Economics of Aging, Labor Studies, Public Economics

Does automatic enrollment into a retirement plan increase borrowing outside the plan? We study a natural experiment created when the U.S. Army began automatically enrolling newly hired civilian employees into the Thrift Savings Plan. Four years after hire, automatic enrollment causes no significant change in credit scores (point estimate 0.001 standard deviations) or debt balances excluding auto loans and first mortgages (point estimate -0.6% of annual salary). We also find no significant increase in auto loan and first mortgage balances in our main regression specification, although the estimated increases in these categories are economically and statistically significant in alternative specifications.

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Document Object Identifier (DOI): 10.3386/w25876