Posted on: September 24, 2019
Employees are financially stressed. They worry about stretching their paycheck to cover all their monthly costs and many have just enough to make student loan debt payments and cover basic living expenses. If they have unexpected expenses, they don’t have the money to pay the bills. Some end up defaulting on their student loans. Employers can help employees with student loan debts by offering refinancing and repayment assistance.
Employees anxious about student loan debt
A growing number of employees are entering the workforce with student loan debt. The Federal Reserve reports that over 44 million American adults owe $1.5 trillion in student loans. Another $1.27 trillion in new student loans will be added by 2028.
For American adults with student loans, the monthly debt payment is their biggest expense. Depending on the loan amount, the monthly payment can be more than a mortgage or car loan.
Employees are anxious about their debts. They spend hours during the workday, wondering how to meet financial commitments. Over 40% of people who earned bachelor’s degrees report having high or very high emotional and financial stress. Learn more about the unexpected stress of student loans.
Workers with student loans say that getting help with refinancing or repaying their loans would ease their stress so they can focus on their job. They appreciate that the business cares about their financial well-being and tend to be happier and healthier at work. Employees also become more engaged and involved in the success of the business.
Educate employees about refinancing
If you don’t have the budget flexibility to add a student loan repayment benefit for your employees, there are other options. You can provide a method for them to refinance their loans, easing some of their financial burden at no expense to your company.
Research shows that many people who take out student loans have a high interest rate. Instead of continuing to pay this rate for the lifetime of the loan, employers can help find different private refinancing options for their employees with student loans.
Some employees may wonder whether refinancing is worth their time and effort. But on average, many borrowers take 20 years to pay off their student loan debts. Employers should encourage workers to ask Nelnet Bank about the amount they’ll save with student loan refinancing. Even saving a small amount each month can lower the total cost they will pay over the life of the loan.
Provide repayment assistance
If you do have some room in your benefits budget, another way to help employees with student loan debt is to provide repayment assistance through Employee Choice.
Employee Choice is a simple benefit that employers can offer by using 401(k) match funds. Each year employees leave $24 billion in 401(k) matching funds from their employers on the table. With Employee Choice, employees can direct these funds toward their monthly loan payment. They also can split the amount, designating a portion of their match toward their student loan and the remainder toward retirement.
Employers offering repayment assistance say the benefit is a competitive advantage. Research shows 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. Learn how student loan repayment assistance also can attract top talent and boost employee diversity.
Another study found that 86% of employees with student loan debts would commit to a company for five years if their employer provided repayment assistance. Many employees will stay even longer because paying off student loans can take at least 20 years.
Encourage employees to avoid loan default
Nationally, the default rate on student loans is increasing. Last year the student loan delinquencies were over $166 billion.
Missed payments can impact credit scores for years. It can also hurt employment opportunities. Some employers now are checking employees’ credit scores before offering a position.
If employees receive advice on refinancing their student loans or receive repayment assistance from employers, they’ll be more likely to make their monthly payments. That means they won’t have to deal with the traumatic impact of a poor credit score caused by unpaid debts. And they’ll be happier, focused, and grateful employees.