How Employee Benefits Professionals Can Help Employees Manage Student Loan Debt

Hiring New Grads? Don't Let Student Loan Debt Kill Their Potential!

It’s graduation season for the Class of 2017. And that means hiring season.

Finally finished with school, a new wave of job searchers – the leading edge of Generation Z – are now knocking on your doors.

Here’s the good news: the percentage of U.S. employers that plan to hire new college graduates is at a 10-year high.1 And you, as a benefits professional, can support these newcomers by helping them mitigate some of the negative financial impacts from their college education. We’ll discuss how later in this post.

But first, let’s get to the bad news.

Your employees are burdened by student loan debt more than ever. And the numbers aren’t pretty.

Over 44 million Americans owe a total of $1.4 trillion in student loan debt -- more than both credit card and auto loan debt -- and that number climbs by more than $2,700 per second.3 While we wait for the latest numbers, we know that the average 2016 graduate has over $37,000 in student loan debt, 6 percent higher than their 2015 peers.2

The celebratory vibe of graduation takes another depressing turn when you look at the facts by gender. Women hold nearly two-thirds of this country’s student debt.

Why? The American Association of University Women attribute it to the fact that 1) women are more likely to go to college, and 2) women tend to take on larger loans to finance that education. And what happens once they start having to pay on those loans? The gender pay gap kicks in, meaning it takes women longer to pay those loans off.4 That's a double whammy for your female employees. 

So, that’s the stark reality of the present. But what does the future look like?

Student Loans: A Look at the Future

The next four years could see major changes to student loan programs. We got a glimpse of the Trump administration’s position in March when it revoked federal guidance barring student debt collectors from charging high fees on past-due loans.5

Now that the 2018 federal budget proposal has been released, we have more insight into the plans for student loans and what that may mean for your future employees. While not likely to be passed by Congress in full, the currently written proposal would, among other things:

Cap borrower’s monthly payment at 12.5 percent of discretionary income. 

The income-driven repayment plan is currently based on post-tax income, whereas discretionary income takes into account additional expenditures (i.e. rent, etc.). But how cost of living will be determined when it comes to collecting on student loans remains unclear.6

Consolidate "Pay As You Earn" (PAYE) and "Revised Pay As You Earn" (REPAYE) federal student loan repayment plans into a single plan.

Under PAYE, undergraduate debt balance is erased after 20 years of on-time payments. Under REPAYE, graduate student loan debt is erased after 25 years. Trump’s proposal would consolidate these two plans and reduce the number to 15 years of repayment for undergraduate loans; however, graduate students would see an increase of five years to their repayment period.6  

Eliminate the Public Service Loan Forgiveness program.

Introduced during George W. Bush’s administration, this program forgave student debt after 10 years of on-time payments for those working in government or nonprofit work. The new proposal would eliminate that benefit.7

Expand access to Pell Grants

Pell Grant aid would get a boost of $1.5 billion in 2018 for Year-Round Pell Grants, intended to help students attend three semesters of college per year -- allowing them to graduate faster and thus borrow less.7 However, the concern is that if more students receive Pell Grants, universities will just raise tuition. Additionally, one study found that graduates who receive Pell Grants were more likely to borrow, and borrow more -- $4,750 more to be precise.2

That’s the big picture, folks. Your employees, especially those new to the workforce, are saddled with student loan debt. But it’s not all doom and gloom.

You, as benefit professionals, can help them manage their student loan burden. Here’s the why and how:

Why Commit to Employee Financial Assistance Programs

Financial assistance programs may seem like a no-brainer to you. For some, though, getting buy-in from groups outside HR is a must in order to implement these programs. So, as you’re pitching new programs to help employees manage their student loan burden, show the C-suite what’s in it for the company.

Simply put, you want your employees to have a great employment experience, especially those coming into a professional setting for the first time. Providing a benefits package that addresses their needs speaks directly to their satisfaction with you as an employer. In fact, 72 percent of employees say a benefits package offering is extremely or very important to their job satisfaction.8

Quality employees create more value for companies. You have the opportunity to develop younger workers into valuable contributors, directly impacting the health of your business.

More importantly, you have the opportunity to make sure those valuable contributors stay at your company. Sixty-four percent of workers say a benefits package is extremely or very important to their employer loyalty.8 Turnover results in a big hit to your bottom line, so offering products that line up with employee expectations can make the difference between keeping employees in your orbit or not.

Young workers are also taking matters into their own hands by accepting employment based on how well it can help them achieve freedom from student loan debt. In the “Ask Brianna” Q&A column, a personal finance columnist offers advice to new college grads asking how they can find a job that will help them afford their loan payments. Would you like to be the employer getting free press for your student loan assistance plan?

If the answer is yes, here’s how.

Give employees the tools to combat student loan debt

Here are just a few ways you can help your young employees feel financially secure as they begin their careers with your company:

Offer benefits targeting student loan debt.

Get straight to the heart of the issue and create a benefits package that offers a clear and direct way to combat student loan debt. Benefits like student loan refinancing or repayment, along with financial education tools, can help younger workers start early in paying down debt, managing expenses and forecasting needs.

Emphasize benefits that minimize financial risk.

Outside of the benefits mentioned above, there are numerous others you may have already implemented, but can communicate in a way that illustrates their impact on financial wellness.

For instance, telehealth helps employees conveniently connect with a medical professional without the costs associated with in-person visits. Highlighting voluntary benefits like accident, critical illness or hospital indemnity insurance helps employees cost-effectively reduce their risk exposure. Lastly, 401(k) incentives can help employees start saving immediately for retirement.

Put the “fit” in benefits.

When employees aren’t matched to the right benefits, it can lead to cases of either wasting their own money on benefits they don’t need or, even worse, being left unprotected against costly medical events, creating even worse financial stress.

With benefits technology that combines data analytics, decision support and content management tools, you can reach the plan fit trifecta.

  • Data analytics to provide deeper insights into your workforce and their needs, leading to the right mix of benefit offerings.
  • Decision-support tools to incorporate claims data into the enrollment experience so employees can find the best match plan right when they are making the decision.
  • Content management tools to complete a well-rounded strategy of communicating to employees in a way that will resonate.  

Appeal to younger workers with mobile access and communication.

Mobile devices are integral to our daily lives. Younger members of the workforce don’t know what life was like before mobile devices (if you didn't already feel old). Reaching these digital natives means thinking mobile first in your benefits strategy with on-demand access to benefits through a mobile app, and communicating through text and push notifications.

What’s next?

Don’t let your employees drown in student loan debt. For more specifics on providing employees a financial safety net, watch the on-demand webinar “The Urgency for Financial Wellness Benefits in the Workplace.”

 

SHRM: New College Graduates Are in High Demand
2 Student Loan Hero: A Look at the Shocking Student Loan Debt Statistics for 2017
PR Newswire: FICO Research: Average US Student Loan Debt Doubled in 10 Years
4 The Huffington Post: Women Hold Nearly Two-Thirds Of America’s Student Loan Debt
5 Chicago Tribune: Trump administration rolls back protections for people in default on student loans
6 Forbes: Trump May End Public Service Student Loan Forgiveness
Vice: What Trump's Budget Could Mean for Your Student Loan Debt
8 Aflac Workforces Report