How student debt programs went from a nice perk to a critical benefit

The COVID-19 era moratorium on student loan payments is set to end in September, forcing more than 40 million Americans with outstanding federal education debt to start making payments again.

About 92% of student loans are owned by the Department of Education, and around 13% of student debt is owned by private institutions like banks or credit unions, according to educationdata.org, an online resource for information on student debt. U.S. student debt has reached $1.73 trillion and grows at a rate six-times faster than the economy.

Read More: The 50 most Googled questions employees are asking about work

The pandemic saw 3.2 million new federal student loan borrowers and a rise in unemployment, driving the largest increase in the total balance of debt since 2013, according to educationdata.org. That spotlight on the student loan crisis has helped employers wake up to the fact that their employees are desperate for greater financial assistance.

But currently, only 8% of employers offer a student loan repayment benefit, according to the Society for Human Resource Management. Employee Benefit News recently spoke with Edward Gottfried, director of products for Betterment’s 401(k) business, about the student debt crisis and why there’s an urgent need for more employers to explore this benefit.

What makes student loan support a critical benefit versus a nice perk?
Employees are struggling financially, and it really does result in decreased productivity in the workplace in a very tangible way. There are a few different factors at play that are really forcing employers to think critically about how they can provide this benefit. The simplest reason is the staggering volume of student debt that is held by Americans — it’s really eye popping. The other really essential portion of this is what we’re hearing from businesses that continue to face hiring struggles across industries.

Read More: Goodly sees growing trend in student loan benefits among veterinarians

A 2017 survey by the American Student Assistance Program found that 86% of young workers would commit five years to an employer that helps them pay off their student loans. That shows us that there's a lot of willingness to make a commitment to an employer that is, frankly, hard to find today.

What needs to happen so more employers offer student loan benefits?
The latest stimulus package included provisions that allowed employers to make tax free contributions up to $5,250 a year to help employees handle their education debt. The federal government making policies that help to provide incentives for employers is always going to be a good way to help people dive into the market. There are some estimates that say that one out of every three employers will offer some kind of student loan repayment benefit within the next several years, and I think that is definitely influenced by recent legislation.

Read More: 3 key things employers should know about student loan benefits

Why might an employer be hesitant to offer students loan benefits?
There aren't a lot of student loan repayment benefit providers who are focused on reducing or alleviating the administrative burden on employers that comes with offering that benefit. There's a healthy amount of administrative overhead required if an employer wants to offer this. However, I anticipate that within the next year or two we’ll start to see a lot of solutions that really are focused more on helping employers who don't have outsourced benefits administration staffing to make these sorts of benefits a reality.

Because for a lot of workers, support is becoming a need, not a want, right? 
The combination of the moratorium on student loans and evictions being lifted in quick succession is definitely troubling. But if nothing else, it brings some much needed attention to why this is such an important benefit offering for employers to consider.