Employees of all ages have student loan debts. Most took out loans for college or professional degrees, or to help family members with tuition costs. But now these borrowers are struggling with the burden of paying off their debts, and it’s affecting their daily lives. Consider the unexpected impact of student loan debt on employees.
Causes high emotional and financial stress
Employees with student loans owe—on average–about $37,000 each. This makes student loan debts second only to mortgage debts. Many people who took out student loans thought their salary would more than cover the monthly payment. But they’re discovering that after making their payment each month, they have just enough money left to cover basic living expenses.
Since most people with student loans make payments for nearly two decades, it’s easy to become depressed. Borrowers don’t see a way out of the problem. Over 40% of people who earned bachelor’s degrees report having high or very high emotional and financial stress.
Creates work distractions
Worries about student loan debts cause employees to be distracted at work. They spend hours each day thinking about ways to reduce expenses and stretch their salary. Because they can’t focus on their work, they can make mistakes. Employees with student loans tend to take more sick days to deal with health problems or exhaustion from financial stress.
Reduces job options
People with student loan debts feel overwhelmed. After earning a college degree, graduates can’t find a job that matches their career interests. Because of their loan commitment, they end up accepting a position outside of their career field. Often, the salary barely covers their monthly loan and living expenses.
Triggers financial worries
Employees with student loans are concerned about their ability to survive unexpected expenses. Most have less than $1,000 saved to cover medical bills or car repairs. They use credit cards to pay these expenses. People with student loans tend to put off buying a home or starting a family.
The default rate on student loans is increasing. Last year the student loan delinquencies were over $166 billion. Missed payments can affect people’s credit scores for years. They may have difficulty buying major purchases, such as a car, or getting a home mortgage. And employment options may be limited as some employers are checking employees’ credit scores before offering a position.
A way for employers to help
Employees want to work for employers who will help them with student loan payments. One study showed that 52% of employees were attracted to a job if the employer offered to assist them in repaying their student loans. Prospective workers said this benefit was more important than many other traditional benefits and perks.
Employers often say they can’t afford to help employees with student loans. But they can. Instead of increasing budgets for employee benefits, employers can use existing resources. The majority of
employers offer 401(k) retirement match funds for employees. But every year employees leave about $24 billion employer match funds on the table.
Employers can also offer Employee Choice, a student loan repayment benefit that uses the funds they’ve already set aside for 401(k) matching contributions. Employees can apply unused matching dollars to help repay their student loans. Or, they can split the matching funds to make a payment to their student loan debt and save the other part for retirement.