Student loan debt burdened workers are so stressed out that some employers are offering student loan repayment benefits to help them.
It’s no mystery to most that the amount of student loan debt that borrowers have accumulated is at a staggering high. However, a recent finding that employers are willing to offer such benefits is practically unheard of. Some employers are literally paying a certain amount per month toward an employee’s student loan debt to help drive down their borrowing costs.
A report released last week adds more clarity to just how much these borrowers are carrying and how much that has risen in just 10 years. Over the past decade, the number of borrowers carrying at least $20,000 in student loan debt has doubled, according to a report released by the Consumer Financial Protection Bureau.
“The Bureau’s research shows that people are taking on more student debt later in life, and having a tougher time paying it back,” said CFPB Director Richard Cordray. “Many employers have taken notice and are developing student loan repayment programs to assist employees in tackling their student debt. Our recommendations are aimed at helping employers ensure these innovative programs deliver their intended benefits.”
While the fact that the staggering figure for those owing at least $20,000 has doubled, it’s even more alarming for borrowers leaving school owing $50,000 or more. For this group, the figure has tripled to 16% from 5%.
Borrowers have access to what are called “income-driven” repayment plans, but that doesn’t seem to be helping them reduce the balances. In fact, 60% are delinquent, which means they are not paying their balances five years into repayment.
These repayment plans allow borrowers to make small or zero-dollar payments and still remain current on their loans. These affordable payments may not decrease their loan balance, but can help them avoid delinquency.
You may think that those with smaller balances may be more apt to start paying their obligations. Not true. Those with less than $20,000 in student loans are even more likely to be in poor standing, with 75% delinquent on at least one of their loans.
Then there are those who choose to go back to school later in life. Since 2003, the percentage of borrowers starting repayment over the age of 34 has doubled, increasing from 25% to nearly 50%. The study also found the percentage of consumers beginning repayment under the age of 25 has decreased from 30% to 15%.
These types of numbers are stressful to read about, so you can imagine the stress of being one of the statistics. This is why employers are offering assistance.
To help, the CFPB is offering advice to help employers and other companies that manage benefits programs ensure that borrowers receive the maximum value. They are recognizing that student debt can have a domino effect on consumers’ financial lives.
Surveys show that both large and small employers are trying to help their workers pay down their student loan debt. One industry survey shows that nearly one-in-10 employers with more than 40,000 employees offer a third-party repayment assistance program. Features of these programs include supplement wellness benefits, and improve retention efforts.
To help these stressed, debt burdened employees, some employers are really showing how much they value their employees.
According to the CFPB:
Borrowers may save hundreds or thousands of dollars in interest payments over the life of a loan when employers prepay student debt. For example, with a 10-year, $30,000 loan at 6 percent interest, an employer paying $100 a month will save the borrower more than $11,000 over the life of the loan. Alternatively, borrowers may free up cash by using their benefits to replace all or a portion of their monthly student loan bill.
Still this help may not be enough. For those who are in default, these employer assistance programs may not be available.