The student loan crisis has reached a total debt of $1.64 trillion across 45 million borrowers. According to a survey conducted by StudentDebtCrisis.org, 33% of federal student loan borrowers were having difficulty making their payments before COVID-19; and a staggering 46% of borrowers expect to be challenged making payments after federal relief ends on December 31, 2020. Even before the pandemic, according to the Center for Microeconomic Data, more borrowers were delinquent on their
Government has tried solutions such as Public Student Loan Forgiveness, but the government alone cannot be expected to solve this challenge. There is an opportunity for the private sector to support employees who took on the debt to prepare for a professional career.
Read more: Five ways student loan benefits can drive financial well-being and organizational results
As Marc Benioff, CEO of Salesforce, wrote in The New York Times —We Need a New Capitalism, “a more fair, equal and sustainable capitalism that actually works for everyone and where businesses, including tech companies, don’t just take from society but truly give back and have a positive impact.
Employers don’t need to sacrifice to support their employees. In fact, there is both a social and economic benefit for employers as well as their employees when they adopt a student loan assistance benefit. The following are eight reasons to provide a student loan assistance benefit in 2020:
1. 74% of borrowers feel stress about their student loan debt which impacts their overall productivity in the workplace
2. When an employer adds a student loan repayment plan benefit they experience an 80% reduction in new-hire employee turnover
3. On average, an employee’s debt is reduced by $6,500, or by nearly 20%, and the duration of loans is reduced by approximately 5 years;
4. Retirement plan balances increase by 6% (across the entire employee population);
5. Employees increase participation in their retirement plan by +7%;
6. Employees increase their retirement contributions by +13%;
7. The CARES Act, which allows an employer contribution to an employee’s debt to be a tax-free event, expires at the end of 2020;
8. Employers can offer their employees the opportunity to convert unused PTO towards a student debt payment, which would not get taxed this year (up to $5,250)
Once employees have a plan for how to manage their student debt, this opens the door to participating in a retirement plan. Student debt impacts employees of all ages. The amount of debt held by employees over 35 years old is nearly equal to the amount of debt held by employees ages 35 and older. Even veteran employees are likely to get relief by receiving a SLA benefit.
Now is the time for companies to make a difference. We have a unique confluence of events occurring. This is a window in time with the pandemic combined with a student debt crisis, a limited time tax-free opportunity (the CARES Act), and many employees struggling to take their PTO.
Employers can build a new capitalism where profit and purpose coexist. Student loan assistance is a powerful tool that helps their employees, the employers, and the economy.
