While many are celebrating a return to normal in the wake of the pandemic, student loan borrowers may be less enthusiastic: Some 43 million Americans—who owe more than a collective $1.8 trillion in education-related debt—will see their first monthly student loan bills in two years as the moratorium on payments is expected to end by September.
Student loan debt now exceeds credit and auto debt, according to the Federal Reserve, and will likely impact this generation for decades to come. In fact, the pause on payments was a mere Band-Aid that when ripped off will quickly reveal that our society has been built on racking up debt.
Not only does excess debt impact the financial futures of millions of Americans but it also can delay their ability to reach life goals such as renting or buying a home or continuing their education, create stress and anxiety, and even spur suicidal ideation for one in every eight borrowers making less than $50,000 per year, according to a 2021 survey. Student loan debt impacts borrowers’ personal and professional lives in profound ways that we are too willing to sweep under the rug.
We need to do more and we need to do better.
How leaders can graduate from bystanders to active supporters
Corporate America can and should step up to stem this ongoing debt crisis, something the federal government also started encouraging with the CARES Act. If we want to quell the Great Resignation, we need to be more willing to support employees—who clearly have different expectations in 2022 than they did in 2020—beyond just a paycheck.
Leaders can implement several initiatives.
Repayment assistance: What do Estée Lauder, Fidelity Investments, and Staples have in common? They all assist workers with student loan repayment—and they’re not alone, as nearly half of companies recently reported interest in offering student loan debt assistance as a benefit, according to the Employee Benefit Research Institute. The benefit is currently available in less than 10% of workplaces, but I expect it to ramp up dramatically as it becomes more of a competitive advantage to offer and employees start asking for it. Moreover, it’s tax free up to $5,250, which makes it a real win-win.
Selected benefits: Some companies give signing bonuses that can be used for student loan payments, while others offer monthly support based on years of service. The U.S. government forgives eligible student loan balances for those who have worked in public service positions for a decade or more, but we need to move more quickly and make these benefits available immediately. They will serve the dual purpose of enticing top-notch employees while reducing the national debt load.
Debt paydown programs linked to 401(k) accounts: Beyond direct payment, this option supports workers today and tomorrow so that they don’t have to choose between making a student loan payment and saving for retirement. Student loans are one of the primary factors why employees do not contribute to their 401(k) and are lagging behind in preparing for retirement.
Abbott, for instance, provides a 5% match in 401(k) retirement savings for employees who contribute a minimum of 2% of total pay toward student loan debt (with verification from an outside contractor). Other organizations match percent for percent to attract workers.
Debt counseling, financial wellness, and education: Just as professional athletes receive financial coaching and counseling as they enter their respective leagues, so, too, should new employees across industries. It can prevent them from taking on more unnecessary debt and help them understand just what they are signing up for. A big part of the debt problem is that it is currently totally opaque to the loan holder, but this is where technology can and is already helping. Many tools exist to help employees see, understand, and act on their debt in an easy-to-use and impactful way.
Counseling and education must go beyond the numbers. The mental health crisis borne of the pandemic isn’t going away, even if case counts are generally declining. To succeed and have the kind of longevity companies long for, workers need to feel supported on all fronts. Wellness and mental health programs are a must.
No excuse for another crisis
We shouldn’t be surprised to learn that borrowers owe nearly $2 trillion in education debt.
While it is relatively easy to get a student loan, repaying the loan—not to mention years of accrued interest—is another story entirely. Meanwhile, this debt impacts everything from the ability to move or start a family to self-worth, anxiety, and depression. The industry is ripe for change, and millions and millions of borrowers are desperate for help.
We have the predictive technology and analytics to highlight just what we’re in for as this moratorium ends. We have models and artificial intelligence. Just like organizations use analytics to target advertisements and outreach to specific consumers or to forecast natural disasters and weather patterns, for example, we have the ability to see where this student loan tsunami is headed and change course. This can lead to a more informed response that can turn a potential disaster into a potent way of finding more skilled employees, earning their loyalty, and supporting individuals, organizations, and the U.S. economy at once.
Tomás Campos is the CEO of Spinwheel.