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The Department of Education announced that over 9 million people missed their first required student loan repayment in three and a half years, which is around 40% of those who had bills due in October 2023. Let’s unpack this.
Last year, the Biden Administration announced the resumption of student loan repayment. This added to the financial stress that Americans were already experiencing due to high interest rates and inflation. With 43.4 million people in federal student loan debt, it’s no surprise that many of your colleagues at work may also be feeling the weight of this repayment return.
Why have people missed payments?
There are various reasons for this, but a couple come to the top of mind:
- People are still figuring out how to make these payments—most people owe between $210-$314/month. That’s a 4-5% of a paycheck for the average worker
- Loan servicer errors—Due to problems caused by loan providers, many people failed to make their payments. As a result, affected borrowers were not required to make their payments in October. During the administrative forbearance, servicers were changed, and clerical errors on their part caused payments not to be made.
This is no doubt a difficult time, and employees are turning to their employers for help. Employers can be a key player in supporting employees with student loans and and general financial education. Let’s break these ideas down!
Student loan benefits
Here are ways to help your employees with crushing student loans:
- Offer to pay off a specific amount of the employee's student loans each year as part of their compensation package. In some cases, this may be tax-free (check with your accountant).
- Offer a matching contribution to the employee's student loan payments, much like a 401(k) match.
- Offer specific student loan education because there are a lot of intricacies around interest rates, repayment options, etc. and this will help your employees make more informed decisions
- Offer trained coaches to guide employees through the student loan forgiveness process (if in public service) or paydown strategies
By offering these benefits, employers will attract and retain top talent, increase employee job satisfaction and productivity, and alleviate some of the financial stress that comes with student loan debt. Additionally, it will be a way for employers to demonstrate their commitment to supporting their employees' financial wellness and long-term success.
Provide financial education
General financial education is a valuable tool to help employees manage their finances and decrease student loan stress. Here are some ideas:
- Hold seminars on topics like budgeting, saving, investing, and managing debt
- Bring in financial experts to advise employees one-on-one
- Circulate financial literacy materials like brochures and online resources
- Encourage employees to take advantage of financial wellness benefits offered, like access to financial advisors
- Host lunch-and-learns about specific financial topics employees have expressed interest in
- Send out regular email newsletters with financial tips and education
- Develop an online portal where employees can access financial webinars, calculators, and other tools
- Offer workshops on student loan repayment strategies and managing student debt
It's a fact that financial stress is something that everyone experiences at some point in their lives, and it has a major impact on their overall well-being. As an employer, you have the power to help alleviate some of that stress from your employees' lives. By implementing a few of the ideas mentioned above, you will increase the financial stability of your employees, which, in turn, leads to happier, more engaged, and more productive team members.
If you're interested in implementing any of these ideas or have questions about how to support your employees' financial wellness, feel free to reach out to us at hello[at]yourmoneyline. com. We're always happy to help!