Student loan borrowing has skyrocketed in recent years leaving employees saddled with significant amounts of student loan debt. In the first quarter of 2024, outstanding debt for federal student aid alone topped $1.60 trillion.1 Borrowers age 35-49 made up the highest portion of debt, with more than $620 billion owed and the highest number of borrowers with debt greater than $100,000.2
In 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law and included provisions that suspended student loan payments without penalties or accruing interest. For just over three years, these student loan suspensions provided borrowers relief from the hardship that loan payments put on their household income. However, in September 2023, when the CARES Act loan provisions were lifted, this relief ended and repayment requirements resumed.3 Your employees may be stressed about the transition back to managing these payments, while also managing their overall debt and savings for the future.
Stressed out employees can have a direct impact on company output and affect the bottom-line. Additionally, consider that financially stressed employees tend to be more distracted and less engaged at work, with one in three stating that money worries have negatively impacted their productivity.4 That’s why it may be particularly important for employers to take interest in the financial well-being of their employees during this repayment transition period.
Offering employee support can be a valuable benefit, especially for millennials borrowers, many of whom have struggled to build wealth in an adulthood marked by financial challenges. Their economic growing pains have also impacted their parents who may be helping their adult children manage their loan payments—even at the expense of their own retirement savings.
Student loan debt is often associated with younger individuals just graduating college and entering the workforce. However, other groups are also impacted by it. People with graduate, or advanced degrees, as well as those who have funded their children’s education also hold a significant amount of student debt.
There are several ways that employers can help:
Take This Opportunity to Offer More Financial Education
Even with the relief provided by the CARES Act, many of your employees likely still face challenges when it comes to student loans, particularly if they (or their children) have large private student loan balances. Learning how to create a plan that works for their financial situations can be instrumental in paying down debt while saving towards other financial goals. From employees who are starting their careers to executives with more complex financial needs, employees can benefit from financial education. Employer-sponsored resources around loan consolidation and debt repayment can be very effective. This can take the form of thought leadership content, webinars or live coaching.
If you offer financial coaching as part of a financial wellness program, directing workers to enlist the help of a coach may be beneficial. Otherwise, you may want to point them to other resources, such as the Consumer Financial Protection Bureau or the Institute for Student Loan Advice.
Consider Helping Employees Pay Their Loans, If You Can
The CARES Act allowed employers to pay up to $5,250 toward student loans on behalf of employees and stated that employees would not owe US federal income taxes on the payments.5 In December 2020, this provision was extended through December 31, 2025, allowing companies with the available resources to further support their employees by providing the additional benefit of student loan payments.
According to an Employee Benefit Research Institute (EBRI) study, in 2023, 34% of employers provided employee student loan repayment assistance (up from 25% the year before) and its forecasted to increase to 40% over the next few years.6 Although it may not be financially possible for some employers to provide this benefit, there are still alternative, more cost-efficient methods to help support employees, such as education and coaching.
When an employer helps workers improve their financial circumstances and offers financial wellness, it shows that they care, especially at a time when there is additional stress that their employees are feeling.
Learn more about Morgan Stanley at Work
