Student Loan and Education Assistance

student loan

Student loan debt has been on the rise, yet paying down the debt has become harder. Many people found themselves struggling with income and savings during the pandemic. To help with COVID-19’s impact on borrowers, Congress enacted a moratorium on federal student loan payments in March 2020. Part of the CARES Act, the moratorium paused loan payments through September 2020 and reduced interest rates to zero. In August 2021, the moratorium was extended through January 31, 2022. Since then it has been extended yet again, with payments and interest now due to resume in May 2022.

Those who were not working or otherwise had to deplete their savings during the pandemic may be wondering how they will start making payments again. Financial insecurities often spill over into workplaces. That, in turn, may reduce productivity and lower workplace morale. Meanwhile, higher education and continuing skills improvement is becoming more important to employers, who reap a lot of the benefits from worker education. These factors have led employees to expect, if not demand, student loan and education assistance. Student loan assistance programs, emergency savings accounts, and employer-sponsored continuing education can support an employee’s financial and educational needs.

Why should employers care?

Jobs require high-cost education that employees may have financed upfront found that 61% of employers believe job skills have evolved. Many jobs that used to require a high school diploma now demand a college-level education. Pursuing that education has created a massive amount of debt. According to a November 2021 estimate by the Education Data Initiative, over 40 million student loans are currently open, with an average balance about $37,000.

Employees with massive debt are stressed

The Teachers Insurance and Annuity Association (TIAA) found in a recent study that almost 95% of non-profit and public sector employees will have trouble paying off their student loans. Most people with student loan debt (85%) feel stressed by that burden. About half have been forced to make a major life change due to debt. Another TIAA study found that about three out of five employees think their employer has a responsibility to help them pay down educational debt.

Replacing an employee can be a huge financial liability.

The Work Institute estimates that replacing an employee can cost as much as a third of the employee’s salary. If you have an employee making $45,000, that means you’ll spend as much as $15,000 to recruit and train their replacement. You may have an employee or candidate that has the required “book-smarts” but needs help with other skills. Consider these questions:

  • Would it cost you more to replace a stressed, burned-out employee, or provide loan assistance to the one you have?
  • Should you replace the employee, or add to their skill set by funding continuing education?
  • Would it cost you more or less to find someone who might have a more complete skill set?

Higher education may still not be enough

Just because an employee or a candidate has a particular degree doesn’t mean they have the necessary “soft” skills. These are skills like critical thinking, debating, the ability to view issues from multiple angles, and communicating clearly. The Society for Human Resource Management (SHRM) has found that “soft” skills are missing in 75% of college graduates. An employee heavily in debt from their existing education may not be able to afford further education to fill the gap.

What can employers do to help?

Student loan repayment assistance

Student loan repayment assistance (SLRA) is often well received by employees. The IRS first authorized SLRA programs in 2018. These allow employers to match employee student loan payments with employer contributions to their retirement plan. Even though it wasn’t direct loan payment help, SLRAs did in essence provide some long-term financing. The CARES Act of 2020 took that a step further by allowing employers to make direct, nontaxable SLRA payments of up to $5,250 per employee between March and December 2020. In 2021, the Consolidated Appropriations Act (CAA) extended that option through 2025.

Emergency savings accounts

Some employers are also helping workers to automatically save for any necessary expenses, including student loan payments, with emergency savings accounts (ESAs). This involves payroll-deducting a set amount each payday for automatic deposit into a savings account of the employee’s choosing. Because they never really feel it, employees may be less tempted to spend the money on other things.

Company-paid continuing education and training

Finally, some employers provide in-house continuing education and skills development programs. Others reimburse employees for the cost of seeking this type of training from an outside source. This option can help with developing those “soft” skills some new graduates may be missing.

Student loan and education assistance just makes sense

Filling vacant positions has become much more difficult for many employers since the pandemic began. Stressed, burned out employees make an already tough situation worse. Brokers and TPAs, let your employer groups know the ways you can help them help employees who are financially stressed due in large part to education-related burdens. In the end, employers are rewarded with less stressed, more satisfied and productive employees. Employees are more able to pay off their student loan debt while continuing to grow in their careers.

DataPath, Inc. is the longest running solutions provider in the benefits administration industry. The company is also the creator of the award-winning employee education and engagement program, The Adventures of Captain Contributor.

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