The Student Loan Crisis: How Employers Can Help Workers
If you’ve hired any new graduates recently, you’re sure to be aware of one of their biggest financial wellness struggles—student loan debt.
The latest numbers from Student Loan Hero are staggering:
- The average class of 2016 graduate owes $37,172 for their schooling, which represents a 6% hike from the previous year’s grads.
- Forty-four million Americans have some amount of student debt.
- The total student debt nationwide adds up to more than $1.4 trillion, beating even credit card debt by $620 billion.
It’s a pretty sad story. But how does this affect your business?
Student Loans Weigh Heavily on Young Workers
In light of the size and scope of student debt throughout the workforce, it’s bound to be impacting some of the people you employ. A 2015 study conducted by researchers at the University of South Carolina and the University of California, Los Angeles found that those who had higher amounts of student loan debt also reported higher levels of depressive symptoms. The study focused on graduates between the ages of 25 and 31, the very cohort most likely to be working under the strain of five-figure student loan debt.
The problem of student loan anxiety doesn’t magically disappear when workers get to the office. When your employees are feeling the squeeze of life in debt, it can lead to increased absenteeism, more 401(k) loans or pay advances, and lower productivity.
Helping your team address their student loans can go a long way in removing some of that stress from their shoulders. And many companies are looking for creative and practical ways to do that.
Recruitment Through Better Financial Wellness
To recruit employees and provide some relief from the burden of school debt, an increasing number of businesses are offering student loan repayment assistance as a benefit. In 2016, the Society for Human Resource Management reported that 4% of companies offered it, with that share expected to rise in 2017. For example, PricewaterhouseCoopers allows both associates and senior associates up to $1,200 a year (and a maximum of $7,200 total) toward student loan debt. And Aetna offers many of their employees up to $2,000 a year (as much as $10,000 total) to repay student loans in a matching arrangement.
Helping employees pay off their student loans makes sense on at least two levels:
- Applicants value it. In a 2016 survey from Student Loan Hero, 77% of respondents said it’s important for a job offer to include a student loan repayment assistance benefit, and nearly two out of five said such a benefit is either “very important” or “extremely important.”
- Debt levels are inversely related to 401(k) investment. The faster your employees can get out of debt, the sooner they can get busy socking away money in your company’s retirement plan. That really matters when you realize that savings rate is by far the leading factor in ensuring workers have a healthy retirement.
Many employers are also now offering a financial wellness benefit, which helps not just younger workers, but all employees. This is a crucial benefit for new graduates who are likely in their first full-time position and learning how to budget and support themselves for the first time, all while saddled with massive student loans. Having loans loom over them for years will cripple their ability to build wealth, buy a house, and contribute to retirement. Throwing younger workers a lifeline will go a long way in ensuring they are productive economically in their careers.
Fostering Behavior Change
Starting a career in a large amount of debt can have a devastating effect on a worker’s well-being. Whether you choose to help your employees with loan repayment assistance or not, a financial wellness benefit is always a smart practice. And making debt reduction a part of that program will be integral in reducing financial stress and restoring a sense of hope.
As you think about how to grow or update your financial wellness benefit offerings, keep in mind the fundamental link between behavior change and results. By providing your employees with crystal clear teachings about how to get out of debt, budget well, and invest wisely, you can look forward to a stronger team and better business results.