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

Innovative employee retention strategies: 9 fresh ideas

Employee engagement and retention are pivotal in every sector, but they carry even more weight in the not-for-profit space, where resources are often limited. High turnover can be both costly and disruptive, impacting productivity and damaging morale. In an era of workforce evolution, to effectively retain their top talent, organizations must explore innovative employee retention strategies that go beyond conventional methods.  Engaged employees are distinguished by their higher productivity, motivation and loyalty, and they are more likely to stay with a company for the long term. Gallup recently updated its research article, The Benefits of Employee Engagement , finding that "low engagement teams typically endure turnover rates that are 18% to 43% higher than highly engaged teams."  In addition to turnover, disengaged employees negatively impact a company's financial health, with turnover costs averaging six to nine months of the departed employee's salary, accordin
Read more

Employee benefits strategies: 5 budget-friendly ideas

Retirement and employee benefits help create a solid foundation for recruitment and retention. They’re also pivotal in enhancing job satisfaction, boosting productivity, encouraging employee well-being and increasing workplace morale. With the work landscape evolving rapidly, organizations are revisiting their offerings to develop stronger employee benefits strategies.  The first area most small- and mid-size employers investigate is quick, short-term ways to foster company culture. In this blog, we’ll cover budget-friendly ideas to improve your employee benefits initiatives. Think of them as smaller action items that can help you gain a competitive edge. Then, we’ll take a closer look at how customizing your benefits plan can support your new efforts.  1. Promote a healthy work culture  Investing in employee benefit plans is not just about fulfilling a checklist. It's about creating an environment where employees feel supported in both their professional and personal lives. Benefi
Read more

What are Alternative Investments? 4-Part Introduction

The market has seen a lot of uncertainty in recent years. Because of this, many organizations are looking for new ways to diversify their investment portfolios. Our best-kept “not-so-secret” secret: alternative investments. In this blog, we'll explore alternative investments with a focus on how they can potentially shield your portfolios from downside market volatility. In addition, we'll break down its benefits and risks and whether it could be a good fit for you. Part 1: What are alternative investments? Alternative investments may help diversify your investment portfolios through non-traditional investment strategies. Non-traditional investment options have varying liquidity ranges depending on the strategy and fund structure. Alternative investments are sometimes referred to as alternative assets. According to the Harvard Business School , the seven types of alternative investments are: private equity; private debt; hedge funds; real estate; commodities; collectibles; and s
Read more