Skip to main content

The impact of student loan debt


Student loan debt affects the financial lives of millions of American workers. Employers feel the burden as well, and have the opportunity to help reduce it. 

The impact of student loan debt on employees

According to a recent Forbes article:
  • 44.7 million Americans have student loan debt;
  • student loan debt is second only to mortgages in consumer debt, at a staggering $1.56 trillion;
  • the average student debt is $32,731 with an average monthly payment of $393;
  • 2.8 million borrowers are in forbearance;
  • 5.5 million borrowers are in default.
Stats like these demonstrate why student loan debt impacts if and how people save for retirement. Its impacts are numerous. Student loan debt causes people to put off expenses like starting families, buying or leasing a car, buying a home and saving for retirement.

It burdens individuals of all demographics, with 14.1 million borrowers between the ages of 35 – 49. That means many middle-aged workers are still paying off student loan debt while worrying about how to send their own kids to college and wondering how those decisions will affect their own retirement savings.

Individuals aren’t the only ones affected by this debt – their employers suffer, too.

Easing employee financial stress

Financial stress costs employers, as it can result in employees’ lost productivity, health- or stress-related illnesses, absenteeism and delayed retirement.

To combat that, employers are increasingly adopting financial wellness programs and offering benefits aimed at easing the burden of student loan debt to help recruit and retain employees.

One of our services at HANYS Benefit Services is to provide education at the participant level. We help our clients’ employees understand their organization’s retirement plan and help set them up for success.

You can help your employees address their student debt – and save for retirement

Ideally, we’d like to see employees saving 10 to 12 percent of their income, but for many employees struggling with student loan debt, that’s just not realistic. Often, our solution is “save what you can.” This may mean starting at two or three percent, or enough to receive the full amount of any company matching contributions.

You can customize your financial wellness and student loan repayment programs just like you do other aspects of your plans.

For instance, a similar pressure point falls on plan sponsors when administering automatic enrollment. This option auto-enrolls participants at a specified level unless they opt-out. While the ideal savings rate would be closer to 10 percent, that would turn most employees off the program altogether. Instead, we work with employers to establish what is best for their company. This may mean starting at a lower auto-enrollment rate and adding automatic escalation to gradually work employees to a higher rate.

The mindset that encourages employers to adopt auto-enroll may be the very same motivation for those who want to adopt financial wellness and student loan repayment programs. For them, it is simply the right thing to do.

Want more on this topic? Be sure to watch “The monkey on our backs,” episode 1 of the For Your Benefit video series. Also, tune into episode 2 where we discuss a few trailblazing companies are seeking to design creative new employee benefits aimed at tackling the student loan debt problem.







If you have any questions or would like to begin talking to a retirement plan advisor, please get in touch by email or by calling (800) 388-1963.

Popular posts from this blog

Employee Benefits Offerings: What Perks Can You Add?

Employee benefits can play a crucial role in attracting and retaining top talent. Beyond compensation and bonuses, offering a variety of perks can significantly enhance employee satisfaction and productivity. But what should you include in your employee benefits offerings?   What are employee benefits?   Employee benefits encompass compensation, bonuses and various perks outside an employee's wage. By offering flexible employee benefits, you can improve employee productivity and loyalty while attracting and retaining talented candidates.   Personalized benefits examples   The type of benefits offered can vary by industry. We've compiled some of the most popular options to help you explore possible employee benefits strategies .  1. Social opportunities   Employee perks don't always have to be tied to a benefits package. Sometimes, the best way to engage your employees can be through social opportunities. Group activities can help im...

What is Risk Management? 4 Key Topics to Know

Understanding risk management in retirement programs  Managing a retirement program is complex, with multiple layers of risk. For organizations and their leadership, understanding and mitigating these risks is crucial to ensuring the long-term success and reliability of these programs.   It often leaves human resource professionals, employers and program administrators questioning, "What is risk management, and how can we excel at it?"  This blog post explores the various aspects of risk management in retirement program administration and provides actionable insights to help organizations better manage these risks.  The importance of risk management  Retirement programs are designed to benefit participants and beneficiaries, but they come with their own set of risks. These risks can be broadly categorized into four main topics:  Fees  Administration  Investments  Cybersecurity  Each of these topics requires meticulous attention and ...

What is HR vendor management? Overview with scenarios

Vendor management can be a litigious environment where efficiency, transparency and risk mitigation are paramount. With the right advisor in your organization’s corner, you’ll feel more confident navigating vendors and managing their services, ensuring streamlined processes and strategic alignment.   In this blog post, we'll cover the basics: What vendor management in HR entails, why it's important, how it can transform businesses and some scenarios in a few business types. Level up your knowledge and find the right partners to thrive.  Understanding vendor management in HR  Vendor management in HR involves the systematic management of third-party suppliers who provide goods and services essential to HR operations. This includes managing contracts, ensuring compliance with service level agreements and optimizing vendor performance to align with a company's long-term business goals.  A robust vendor management strategy can provide organizations with a structured ...