How companies can help employees with student loan debt
After paying monthly student loan minimums, many Americans have just enough to cover basic living expenses, which means that when unexpected expenses arise, they often end up defaulting on their student loans.
It’s no wonder that student loan debt is a top financial stressor for so many. There’s good news, though. Not only can employers help employees with student loan debt, but doing so is in everyone’s best interest. Here’s how.
A growing number of employees are entering the workforce with student loan debt. About 43 million adult Americans carry a federal student loan, owing $1.5 trillion in federal student loan debt, and Americans also owe an estimated $119 billion in student loans from private sources not backed by the government, according to the Center for American Progress.
Experts say that this debt is causing anxiety and a distracted workforce, with many people spending hours of their workday wondering how to meet financial commitments. A majority of borrowers with student loan debt report being worried about paying off their student loans, according to research reported by Phy.org from the University of Missouri, research which also found a strong link between student loans and mental stress for borrowers.
Those with student loans say that getting help with refinancing or repaying their loans would ease their stress so they can focus on their job. When such assistance is offered, employees appreciate that their employer cares about their financial well-being, and ultimately becomes more engaged and involved in the success of the business.
Some may wonder whether refinancing is worth their time and effort, but research shows that many people who take out student loans have a high interest rate, and on average, borrowers take 20 years to pay off their student loan debts. Instead of continuing to pay a high rate for the lifetime of the loan, employers can work with education benefits providers to direct employees toward private refinancing options. Even saving a small amount each month can substantially lower the total cost paid over the life of the loan.
Employees are likely to appreciate having the option to refinance loans as well as receive education and financial advice from their employers, say experts who name supporting employees’ financial health as a great way to increase employee loyalty and engagement.
Avoiding Loan Default
Nationally, the default rate on student loans is increasing. In 2018 alone, student loan delinquencies amounted to over $166 billion.
Missed payments can affect someone’s credit score for years. It can also affect employment opportunities as some employers are now checking candidates’ credit scores before making job offers. 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 and less likely to deal with the consequences of a poor credit score.
There are many ways companies can support their employees who are currently managing student loans, and when they do, experts say they’ll have a happier, healthier and more grateful workforce.
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