In recent months, discussions about the student loan debt crisis have centered around the numbers: 44 million Americans who owe about $37,172 each for college loans. That’s approximately $1.6 trillion! The numbers are staggering. Consider four effects of the student loan debt crisis, as well as BenefitEd a repayment assistance benefit employers can offer employees.
1. Transitional workforce
News stories regularly discuss the tight labor market and the challenge employers have in finding and keeping talented workers. Since there are open positions in every industry, prospective employees can be selective in finding a job that’s the right fit.
The Federal Reserve Board indicates that 42 percent of Americans who attended college, and 30 percent of all adults, have incurred debt to finance their education. Younger workers are looking for jobs that offer higher salaries and student loan repayment assistance.
2. Business growth
High employee turnover plagues American businesses. Within the past seven years, turnover rates have increased by 48 percent across all industries. Overall the cost to replace workers who leave exceeds $160 billion a year.
Businesses continually have to invest capital in finding and keeping top talent, instead of investing in business growth into new markets, updating products, and improving customer service.
3. Economic impact
The student loan crisis affects the U.S. economy in several ways. According to Gallup, millennial turnover costs the U.S. economy $30.5 billion a year. Employers with high employee turnover, end up designating budgets to hire new workers instead of growing the business, bringing in more income and investing in the economy.
Employees with student loan debts have less discretionary dollars to make purchases that can boost the economy. After making a monthly payment of about $350 on their student loans and covering essential living expenses, workers have only a little left from their paycheck for other costs. If employers help repay student loans, employees can reduce the length of their loan and can start saving for retirement and other future expenses.
4. Retirement planning
As employees of all ages struggle to make ends meet, they aren’t able to set money aside for savings. Many also worry they won’t be able to afford retirement because they are crushed by student loan debts
News reports often focus on the student loan burden of younger workers. But research shows that employees into their 60s owe nearly $229 billion in student loans, or about $33,000 each. Older workers have taken out loans to pursue graduate degrees, get additional training or to assist their kids and grandkids in earning college degrees. With this debt load, instead of pursuing their dreams, employees project they’ll be working to pay off their loans instead of relaxing and enjoying their retirement years.
How employers can ease the burden
Employers in every industry are exploring ways to help employees pay off their student loans. Many say they don’t have the budget to assist employees equitably. But they can.
Each year employees leave $24 billion in 401(k) matching funds from their employers on the table. With BenefitEd Employee Choice, employers can provide equal benefits for all employees. And they don’t have to adjust their budgets because they can use funds they’ve already set aside for matching 401(k) contributions.
Employees can make full use of their employers’ matching programs by applying these unused dollars to help pay down student loan debt. Or, employees can split the matching funds to make a payment to their student loan debt and put money away for retirement.