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Faculty Research Working Paper Series
Brigitte Madrian
Aetna Professor of Public Policy and Corporate Management
phone: (617)495-8917
fax: (617)496-1722
The Availability and Utilization of 401(k) Loans
Beshears, John, James J. Choi, David Laibson, and Brigitte C. Madrian. "The Availability and Utilization of 401(k) Loans." HKS Faculty Research Working Paper Series RWP11-023, June 2011.
We document the loan provisions in 401(k) savings plans and how participants use 401(k) loans. Although only about 22% of savings plan participants who are allowed to borrow from their 401(k) have such a loan at any given point in time, almost half had used a 401(k) loan over a longer, seven-year horizon. The probability of having a loan follows a hump-shaped pattern with respect to age, job tenure, account balance, and salary, but conditional on having a loan, loan size as a fraction of 401(k) balances declines with respect to these variables. Participants are less likely to use loans in plans that charge a higher interest rate, and loans are smaller when plans allow fewer simultaneously outstanding loans, impose a shorter maximum possible loan duration, or charge a lower interest rate.



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