Student loan debt is a massive burden on employees. Here’s how to show workers you value them by investing in their financial well-being.
Here's what you need to know:
- Student loan debt assistance is a strategy that can help you keep the best employees
- Offering competitive salaries, benefits, and working conditions along with debt assistance helps workers to thrive
- Companies also benefit from increased worker productivity and loyalty when they provide employees with the tools they need to be financially successful
Editor’s note: This story was updated on August 25, 2022
For many employees, student loan debt is a significant concern. They may not be able to get ahead in their careers because they are locked into a debt repayment program. They may also be unable to afford education for an advanced degree. Offering a way to alleviate their student loan debt could help you attract and retain top talent.
In recent years, student loan debt has ballooned to become 1 of the highest consumer debt categories in the United States. At $1.3 trillion, employees have experienced increased financial stress, health risks, and decreased productivity in the workplace.
This level of indebtedness can make it difficult for young professionals to get started in their careers. In addition, many organizations are noticing that they are struggling to retain top talent as more and more employees cannot meet their financial obligations.
More than 77% of employees in a survey said that student loan assistance programs were top considerations when job hunting. As a result, helping students pay down their debt is a significant selling point for talented young professionals weighing multiple job offers.
Student loan relief continues to be a huge topic of discussion for the American workforce, especially following President Joe Biden’s announcement of his student loan forgiveness plan in August 2022.
If your company values talent, you can offer competitive salaries, benefits, and working conditions to keep your best employees. You can also help employees pay down their student loans. Student debt assistance can help you retain top talent by easing the burden of student loans and making higher education more accessible for current and future employees.
Finally, show your employees that you are concerned about their long-term financial well-being and are willing to invest in them.
What’s your biggest 2022 HR challenge that you’d like to resolve
Answer to see the results
More companies are offering assistance as education costs rise
In 1980, the annual cost of full-time education at a 4-year college was $10,231, including tuition, fees, and room and board. By 2019-20, the total price skyrocketed 180% to $28,775. As the cost of education rises, it’s becoming more popular for companies to offer student loan assistance, lest they appear unsympathetic.
Furthermore, the cost of tuition has increased faster than inflation, wages, and even the cost of living. If your employees are struggling with student loan debt, they might not be able to afford things like healthcare or retirement savings plans.
In addition to helping retain top talent by paying off their loans, you could provide scholarships or other perks such as free lunch on Fridays or matching 401k contributions. Still, many young employees prefer the student loan assistance program over retirement matching.
A shocking number of people are in student loan debt
Student loan debt is the 2nd-largest source of debt in the United States (2nd only to mortgages). Moreover, student loan debt has continued to increase year after year. There are many reasons for this increase:
- Fewer financial aid options available as tuition costs rise
- Increasing numbers of high school graduates who go straight into college
- Fewer students getting part-time jobs or taking time off before college
- More students attending 4-year colleges (instead of community colleges)
- Lack of jobs for recent graduates who have taken on large amounts of money from student loans
Over half (55%) of Millennials report having some level of education beyond high school but also indicate that they still have outstanding student loan debt. According to the Federal Reserve, the average college debt among U.S. student loan borrowers in 2021 was $32,731. This is an increase of approximately 20% from 2015 to 2016.
Most borrowers have between $25,000 and $50,000 outstanding in student loan debt, with average monthly payments between $200-$300.
Debt isn’t the half of it. As of December 2019, 10% of all American households have defaulted on their student loans, meaning 7.8% of all student loan debt is in default. Up to 15% of all student loans are in default at any given time.
Additionally, more than 1 in 10 American graduates default within the first 12 months, leading to more than a million new loan defaults every year. With $124.4 billion in debt and 9 million borrowers and their families affected by loan defaults, the time is right for companies to lend a hand.
Debt payment plans are holding employees back
Debt payment plans are holding people back from improving their credit scores and getting ahead. Defaulting on a student loan can haunt borrowers for years, making it difficult to get approved for a car loan or mortgage.
Another problem with debt payment plans is that your employees will pay the same amount every month regardless of income changes. Getting a higher monthly payment approved by the lender can be challenging, even if they start making more money.
But if your employees have to pay more than they can afford, it puts a strain on other life areas like family budgets and discretionary spending. Debt assistance programs can offer relief for your employees struggling to make monthly payments.
For your employees considering higher education, help them understand how student loans affect their financial health from credit scores. You can also teach them how to choose a college that best fits their career path.
Additionally, you can address employee concerns about their retirement by providing a company match to encourage them to start saving. This can be set up as an automatic deductions from their monthly pay.
How employers and employees can address the problem
One of the most significant issues we face regarding student loan debt is not acknowledging it as the root cause. Instead of focusing on how to solve the problem, people are only looking at ways to manage their loans. It’s time to act, not react.
The real solution lies in employers helping their employees by offering assistance and promoting education. In contrast, employees themselves must take advantage of these resources and actively engage with them if they want their careers to flourish. This includes sharing experiences with others struggling with student debt, so they know they’re not alone in their struggles.
Find the right payment plan for your business and workers
You want to help your employees make the best financial decisions as a company. Student loan debt assistance services can help employees find the right payment plan. Your employee is the best person to know what works for them and their finances, so it’s up to you and your HR department to provide resources that allow them to do this.
Retaining top talent can be challenging, but student loan debt assistance is a strategy that can help you keep the best employees.
The benefits of providing financial assistance to employees extend to your company. While stressed workers lose several hours of productivity daily by taking on economic challenges, your company can benefit by encouraging employees to seek assistance and solve problems.
Retaining top talent can be challenging, but student loan debt assistance is a strategy that can help you keep the best employees. Most workers would consider taking a job with lower pay and fewer benefits if they could participate in student loan repayment assistance.
Questions to keep in mind when creating an assistance program
Student loan debt is a significant financial burden for many people. However, there are ways to mitigate the impact of student loan debt on their careers. Use programs to help employees reduce or eliminate their obligations by providing financial relief or forgiveness of their loans. But how?
Third parties provide most loan assistance programs. You may want to consult with your insurance provider to know if they offer this benefit. If so, you can make direct payments to your employees’ student loan servicer while allowing employees to make them too.
Here are some questions to ask yourself:
- Would your company consider offering a monthly payment on your employees’ student loans?
- Is your company willing to match employees’ contributions?
- Would you require your employees to continue making minimum monthly payments?
- Would you let them use your benefit to reduce their monthly payments?
Any student loan debt assistance option would save money for your employees. Of employees surveyed requesting student loan assistance, 35.66% said they would prefer to use it to make part of their current monthly payment. The other 64.34% said they’d use the money to make extra payments and take years off their loan.
The importance of giving workers tools for financial success
In today’s economy, a college degree is more important than ever. However, the cost of a college education continues to rise, and many students are left with overwhelming student loan debt. Student loan debt can significantly affect employee finances and indirectly affect your business.
If you want to attract and retain top talent, provide employees with the tools they need to be financially successful. Student loan debt assistance programs can help employees streamline their payments and ultimately save money in the long run.
By providing relief from student loan payments, you can help employees focus on their work and reduce the risk of losing them. In addition, employees who receive assistance in paying down their student debt are more likely to be satisfied with their jobs and stay with you.
By providing this service, you have an advantage when recruiting prospective team members — you’ll show you value employees’ financial well-being. You’ll also benefit from increased productivity and loyalty. Student loan debt assistance is a valuable tool for businesses to keep their employees happy and productive.