President Biden’s announcement this week that the federal government will repay up to $10,000 in student loans for borrowers who earned less than $125,000 during the pandemic, and up to $20,000 for those who received Pell Grants, has been welcome news for some student loan borrowers.
Although long-awaited, the program doesn’t apply to all employees and of course doesn’t take into account the full scope of debt, on average. It’s news that not only spotlights the large toll that student loan debt has taken—but also the role that employers can play in addressing the $1.6 trillion problem for their employees.
It indicates that student loan debt is “top of mind on the Hill, which also indicates that it should be top of mind for employers,” explains Kristen Carlisle, general manager of Betterment at Work, a financial wellness provider. “While excellent, [the government help] doesn’t do everything that needs to be done in order to help people take control of their student debt. For many this will be meaningful, but for the vast majority, it will be a drop in the bucket.”
That’s where, many industry insiders say, employers come in.
Student loan repayment benefits have been an emerging trend over the past several years, although there has not been widespread adoption. About 7% of U.S. organizations offer student loan benefits in 2022, according to data from the Society for Human Resource Management’s 2022 employee benefits survey.
That’s despite the fact that student loan benefits are among the most widely desired by employees: For instance, a Betterment survey last fall found that 57% of employees believe their employer should play some type of role in helping them pay down their student debt, either through financial support, digital tools, or an adviser to help guide them through the process, Carlisle says.
And that employee desire, coupled with a hot job market, indicates student loan benefits are ripe for growth. A recent report from consulting firm Willis Towers Watson found that more than 52% of employers surveyed expect to offer counseling for student loan refinancing or consolidation, a sharp increase from 24% in 2021. WTW also found that about one-third of employers expect to provide contributions for student loans by 2023, up from 8% last year, while the number of employers offering student loan consolidation is expected to surge to 44% by 2023 from 14% in 2021.
“We have seen mounting interest in the number of employers that want to assist employees with student debt and support the next generation with college coaching and scholarships,” Lydia Jilek, senior director of voluntary benefits solutions, at WTW told HRE earlier this summer.
Interest will likely increase after Biden’s announcement, especially as the federal moratorium on payments—which allowed borrowers to pause student loan payments due to COVID-19—expires at the end of this year. Carlisle recommends that HR leaders spend time talking to employees about benefit options and what kind of support they most want from their employer.
That’s especially important as employees increasingly expect their employers to increase support—or they are more likely to walk out the door.
“What people are starting to realize is, there’s a lot that goes into your total compensation, from your benefits offerings all the way through to your vacation time. And we’ve entered a new era where people are not going back to the office in droves. It’s a hybrid work environment,” Carlisle says. “The types of things that people are looking for from their employer are not things like snacks or vacation; they’re looking for support as it relates to their total compensation package.
“That’s got a lot of employers thinking about how they can put together a compelling compensation package that includes competitive benefits. And a lot of that involves financial help.”