Knowledge Center / Blog
Employers, Grads, and the Student Loan Debt Crisis
In the midst of a student loan debt crisis how employers choose to support their recently-graduated employees could mean all the difference in the war for talent.
Student loan debt in the United States recently surpassed 1.5 trillion dollars—the highest consumer debt category after mortgages. There are 44.7 million student loan borrowers who owe, on average, $33,557 in outstanding student debt. That’s 35% of the working population with student debt, and that percentage will only increase as Baby Boomers age out of the workforce and Generation Z becomes a larger share of the workforce.
A person’s debt greatly impacts well-being and one’s ability to accept certain jobs. Many college graduates entered campus as freshmen with the expectation of graduating and making $60,000 in their first year of employment; the reality places the median starting salary for a college graduate at $48,400. So, what can an employer do to convince a job candidate with $33,557 in student debt to take a job at $48,400?
How an Employer Can Help
The full responsibility to fix ballooning student debt certainly doesn’t fall on employers alone, yet employers have the unique ability to offer benefits that can alleviate certain stresses for recent grads or help chip away at employees’ student debt loads, while aiding employee productivity, engagement, and longevity with the organization.
Offer a repayment benefit. Educational assistance/tuition reimbursement programs—where an employer supports employee continuing education by paying part of the tuition—have been around a long time. Now, repayment benefits are a growing trend, especially for employers seeking to hire recent grads. This program is designed to reimburse a specific dollar amount each year for employees making student debt payments. It alleviates stress, decreases the debt burden, and clearly highlights the support of your employees.
Contribute to a 401(k) plan when an employee makes student debt payments. It’s difficult for employees to save for retirement when they’re overburdened with debt, which can cause employees to forfeit employer 401(k) matches. The IRS is starting to make it possible for employers to continue contributing a 401(k) match for employees who are making qualified payments to student loans. Working with your 401(k) administrator to develop a creative plan that helps people with student debt sends a clear message about your commitment to their financial well-being.
Partner with a financial advisor. Partnering with a financial advisor for your company could offer no or low-cost financial consultation for your employees—recent grads or otherwise—during or after work hours. This allows employees to weigh their options while talking to a financial expert.
Offer an Employee Assistance Program (EAP). An EAP allows an employee to speak to a professional to address stress or other concerns in a confidential, low risk setting. We’ve written about EAPs previously, and you can read more about their benefits and uses HERE.
Supporting your employees through financial challenges, particularly the student debt crisis, can help reduce employee stress so they can be fully present at work and it can make you an employer of choice attracting and retaining top talent.