2nd we speak about the brand new determinants out-of 401(k) loan non-payments, beginning with the newest realization analytics searching from inside the Table 5

In one single seasons, regarding the one-5th out-of loan-eligible staff inside our take to got a minumum of one loans a great. But certainly professionals terminating employment with an excellent financing, 86 % failed to pay off the a good fund (others reduced the membership money and therefore eliminated standard). Since members defaulting on their plan money totaled up to 10% of all professionals that have outstanding money, i estimate one on the 90 % out-of participants reduced the money over the five-year several months seen. 23

Dining table 5

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Statistics evaluating users who defaulted instead of paid off its finance come in Table 6 , including analysis into the all of the individuals as well as financing-eligible package users. The brand new test away from defaulters consisted of 130,295 professionals from inside the 401(k) arrangements just who terminated work with one financing a fantastic. 24 Than the other package consumers, these people were quite young, had faster business tenure, and you will stored all the way down balance. People who defaulted on their money also got lower income, straight down balances, along with smaller low-retirement wide range, than others just who reduced the finance with the making their efforts.

Dining table 6

To compare employees who terminated employment and defaulted on their 401(k) loans with those leaving employment who repaid their loans in full more rigorously, we next estimate a multivariate Probit model where the dependent variable, Dwe,j,t, refers to the probability of individuals terminating their jobs and defaulting. Continue reading