student debt Archives

Employee Student Loan Debt: 10 Things You Need To Know, Part One

by Leah Rosen | Jan 29, 2018 | Blog

Employee student loan debt: 10 things you need to know, part one. What employers need to know about how student loan debt affects their employees.

The U.S. has a student loan debt crisis. And employers are paying the price.

Over 44 million Americans are carrying a total of $1.48 trillion in student loans. Forty percent of adults under 30 and 16 percent of adults overall live with outstanding student loan debt, according to the federal reserve’s 2017 Survey of Household Economics and Decisionmaking.

Chances are, your employees are among those affected. Employees facing significant student loan debt are more likely to defer saving for retirement, buying a home, getting married and having children. They’re also more likely to seek out a second full-time or part-time job to cover their expenses. As a result, their concentration, productivity and overall physical health suffers from the accumulated financial stress.

The financial cost of higher education is only increasing with time, matriculating well-educated, inexperienced and deeply indebted graduates into the workforce. In this two-part series, we offer you 10 things you should know about how student loan debt affects your employees:

1. Student loan debt is the second-biggest type of personal debt in the United States.

Student loans are one of the largest contributors to overall household debt among Americans, second only to mortgage debt. While the overwhelming majority of those loans are federally held, there has been an increase in borrowing from private lenders. Private student loans are ineligible for loan forgiveness programs or income-based repayment programs, complicating repayment plans and decisions on where (and how) to seek debt relief.

2. The amount of student loan debt Americans owe is getting worse with time.

In February of 2017, the Federal Reserve Bank of New York announced that student loan debt had grown for the 18th consecutive year and that the amount borrowed doubled in the last eight years, reaching a total more than $1.48 trillion owed. Not only are more students are taking loans for higher amounts but they are paying them back at a slower pace than in the past.

3. Student loan debt is affecting your workforce.

Sixty-eight percent of all new college graduates have student debt. Even if your employees don’t have significant amounts of student debt themselves (which is a relative assessment), they’re likely to have friends or relatives who do. Student loan repayment plans average at $351 per month and that number isn’t going down any time soon. It’s important to note that the average annual US salary for 24 to 35 year olds is $39,000. Student loan repayments are killing your employees’ financial wellness and are averaging nearly 10 percent of their income, replacing retirement contributions, mortgage payments and possibly even monthly health insurance costs.

4. The average debt per student has risen to nearly $30,000.

One fifth of graduated student loan recipients aged 25-39 take on extra employment in order to make payments on their student loan debt. Employees working a second job can mean lower productivity while at work and a difficulty in maintaining a reliable work schedule. Overworked employees are also more likely to experience fatigue and burnout from the added stress of juggling multiple jobs – as well as the stress from their student loan debt.

5. The average interest rate per student loan is approximately 5 percent, meaning your employees actually end up paying back significantly more than what they borrowed.

The interest rate paid by a loan recipient is dependent upon which type of loan and repayment plan that they have been given. For federal loans, the current amount for direct subsidized and unsubsidized (the type provided to undergraduates) loans is 4.45 percent. At the graduate level, the interest rate is 6 percent. For people 60 and over who take out loans to help younger relatives, the rate is 7 percent. Private student loans carry interest rates averaging 9 to 12 percent. Depending on the repayment or consolidation plans, these high interest rates can quickly inflate the initial amount of the loan and add tens of thousands of dollars to what an individual is trying to repay. And, interest and late fees are paid before any monthly payments are applied to the original loan amount.

And there’s even more you need to know. To learn more about student loan debt and your employees, be sure to read Part Two of this article here.

More on Student Loans and Financial Stress

Employee Student Loan Debt: 10 Things You Need To Know, Part One

Employee Student Loan Debt: 10 Things You Need To Know, Part Two

Student Debt Financial Stress Haunts Millennials and Older Workers, Too

What Tops Financial Stress for Employees?

The Student Debt Crisis is Growing and Affecting Your Workforce. What Can You Do?

LendEDU Finds Student Debt is Down, But Financial Stress is High

by Lauren Kocher | Aug 16, 2017 | Blog

In this week’s Best Money Moves roundup, we take a look at news stories and new research studies that may impact employee benefits and HR issues. We hope you find this news roundup helpful, and we’d love your feedback.

For new graduates entering the workforce, student debt is still a major cause of financial stress.

The average student debt per borrower for the Class of 2016 is $27,975, according to LendEDU’s second annual Student Loan Debt by School by State report. That number is actually down 1.5 percent from 2015, but it isn’t quite enough to lift the stress from graduates starting their careers with significant student debt.

The five states with the highest average student debt per borrower are probably not what you expect. Most of them are on the East Coast, and for all of them, the proportion of graduates who carry student loan debt is 60 percent or higher — some even reaching as high as 75 percent. Take a look:

Pennsylvania
($35,185 average debt per borrower, 69 percent of grads have student debt)
New Hampshire
($35,143 average debt per borrower, 75 percent of grads have debt)
Delaware
($33,650 average debt per borrower, 63 percent of grads have debt)
Connecticut
($32,326 average debt per borrower, 60 percent of grads have debt)
South Dakota
($31,518 average debt per borrower, 75 percent of grads have debt)

It would be easy for employers to read the headline “student debt is down” and think of it as good news — and it is. But looking more closely at the numbers, it’s clear that student debt is a serious problem that’s not going away anytime soon. Shouldering the burden of student debt impacts your employees’ stress levels — and overall well-being — every single day.

Understanding your employees’ financial needs is the first step to helping them overcome these hurdles and stay more focused, productive and happy at work.

Financial stress is the top cause of lost productivity. Shifting the perspective of your employee benefits program to address it isn’t just good for employees, it’s good for business.

It’s almost time to make big decisions about your 2018 benefits offerings. While the possibility of health care reform generates a lot of uncertainty among today’s workforce, there are ways you can prepare them for the long term.

College costs are increasing far faster than income growth. It’s no wonder that students struggle to pay off hefty student loan bills for years afterward. Luckily, parents can help.

Voluntary benefits are growing in popularity, but many employees don’t really know or understand the options available. Five ways to educate your team.

Is your company “aging-friendly?” Almost 70 percent of employers believe their employees won’t be able to afford to retire at 65. It’s time to adapt to your older employees’ needs.

Language training improves employee engagement and retention. Research shows that 70 percent of employees with language training feel more confident in their work and interactions with their teams. Is it right for your employees?

Nearly 30 percent of the U.S. population is responsible for the care of a family member. A survey by Northeast Business Group on Health and AARP ranked caregiving as one of the top 10 employee health and wellness benefits priorities for employers. Here’s how you can assist those who assist.

Are your employees leaving money on the table? Among employees who participate in 401(k) programs, roughly one in five don’t take advantage of their full employer match. That missing money adds up.

Not all states are created equal when it comes to health care. A new report from WalletHub, 2017’s Best and Worst States for Health Care, compares states across three areas: cost, accessibility and outcome. Where does your state rank?

Have something to add? Email info@bestmoneymoves.com.

Employees’ Student Debt Stress Blocks Their Financial Goals

by Emily Pfund | May 31, 2017 | Blog

Did you know your employees’ student debt is keeping them from pursuing their financial goals?

According to a new study from Prudential Financial, 55 percent of college graduates say their student debt keeps them from saving for emergencies, 42 percent say it’s made them delay buying a home and 40 percent say it keeps them from saving for retirement.

On top of that, many grads don’t completely understand their loans. Almost three-quarters of those surveyed didn’t know how long they’d be making payments, 53 percent didn’t know their future monthly payment amounts and 25 percent didn’t know whether their loans were from the government or private companies.

Here’s what your employees wish they’d known before taking out student loans.

By 2050, the world could face a $400 trillion retirement savings shortfall. People are living longer, so they need more money to fund longer retirements. Our current savings systems aren’t set up to handle it. What can be done?

Would your HR department take a “listening tour” of your company? That’s what the team at Uber did following recent HR (and PR) issues. Here’s what they learned about their employees.

Best Money Moves made Shortlister’s inaugural Top 20 list of financial wellness providers! Check it out.

Don’t forget about your deskless workers when it comes time for employee training. Because retail workers, warehouse staff, truck drivers and other employees without a cubicle often don’t have company email addresses, they could fall through the cracks in corporate training programs.

Even older, wealthier workers struggle with basic retirement planning concepts. In a study by the American College New York Life Center for Retirement income, 74 percent of these workers failed a 38-question retirement planning quiz.

While low unemployment is good for the overall economy, it makes hiring new employees more difficult. Six tips for hiring in a tight labor market.

America’s teens lack basic financial literacy skills and fall far behind their peers in other nations. According to the Program for International Student Assessment, the U.S. ranked seventh out of 15 countries for financial literacy, with China, Belgium and Canada taking the top spots.

A third of older Latinos say they’ve borrowed money from their retirement accounts, more than people of other races in the same age group, according to a new Associated Press-NORC Center for Public Affairs Research poll. In contrast, about a quarter of older whites and blacks said the same.

Changes in the workplace make employees more likely to quit, according to a study from the American Psychological Association. The study found people who’d recently experienced organizational changes at work were more stressed, less trustful of employers and more likely to leave.

Have something to add? Email info@bestmoneymoves.com.

Student Debt Financial Stress Haunts Millennials and Older Workers, Too

by Emily Pfund | Mar 8, 2017 | Blog

Your employees are aging. One reason your employees are working well into what would normally be considered their retirement years is student debt: theirs, their children’s and even their grandchildren’s.

While most people imagine student debt is an issue that mostly affects Millennials, their parents are also feeling the pinch of loan payments in their budgets, and struggling with financial stress as a result.

More parents are taking out Parent Plus loans to help cover the full cost of their children’s educations, and these parents are now delaying their retirement to pay off their debts.

See what impact these debts have on your older workers.

Countries with higher retirement incomes tend to have lower financial literacy rates. A survey of youth in 18 countries found the U.S. actually bucks that trend with both low retirement income replacement rates AND low financial literacy rates. What can be done to fix this?

Scheduling a doctor’s appointment is a struggle for full-time employees, especially if they work a traditional 9-to-5 that requires them to be in the office when the doctor’s office is open. Some companies are now offering concierge health benefits, bringing the doctor to employees in the workplace.

Credit card debt is a huge source of financial stress for employees, and choosing the wrong card can make it worse. Help your workers pick the best card for their finances.

Would you offer employees a choose-your-own benefits plan? This California tech company wanted to offer a student loan repayment benefit but didn’t want to leave out those employees without debt. So they gave employees their choice of three benefits.

Could the state of your finances cost you a job offer? A recent study from the National Financial Educators Council found that 4.08 percent of workers have been denied a job offer or promotion because of their finances. Do you run credit checks on your potential hires?

Showing employee appreciation matters. A whopping 78 percent of employees in a recent survey said they’d work harder if their efforts were better appreciated. How many of these seven ways to show employee appreciation have you tried?

Millennial employees are less likely to say they’re loyal to their employer than older generations. So what can businesses do to cultivate loyalty? Start by upgrading your physical office space and then pile on the perks.

Some employers think more money means more motivated employees, but that might not be the case. Employee motivation is more tied to intrinsic factors, according to a recent study. So what is more motivating than money?

Retirement continues to be one of the biggest sources of financial stress for America’s workers. A recent report by the National Institute on Retirement found that most Americans are “highly anxious about economic security in retirement.” See the report’s other worrying findings.

Have something to add? Email info@bestmoneymoves.com.

It’s hard to stay on top of everything in the news. That’s why each week our Best Money Moves newsroom will bring you the most important news in financial wellness, employee benefits and financial stress. We hope you like the information and, if you do, please spread the word. For midweek developments, follow us on Twitter and on Facebook.

College Costs Are Outpacing Most People’s Income Growth – by a Lot

by Emily Pfund | Sep 26, 2016 | Blog

College costs a lot. In fact, today’s college students are taking on unprecedented amounts of debt to pay for an education – they hope – will lead to better career prospects down the road.

Watching Millennials struggle under this load of student debt can be confusing for older generations who could put themselves through school by working summer jobs. But it’s not that today’s students are lazy or unwilling to work; they just have to pay more for college. A lot more.

A recent study by ProPublica took a state-by-state look at median income and yearly tuition at public four-year colleges and universities, including the District of Columbia. It found that while the national median income fell about 7 percent between 2000 and 2014, the cost of college tuition rose by 80 percent!

Every single state saw a bump in tuition costs. Median incomes increased in 19 states, but none of these increases came close to offsetting the college costs in those states.

Arizona had the highest tuition increase of any state, at 202 percent, with a 10 percent drop in the state’s median income. In contrast, Wyoming had the smallest tuition hike. The cost of higher education in that state rose just 12 percent from 2000 to 2014 and the state’s median income rose 2 percent.

With numbers like that, it’s no wonder students turn to loans to fund their education and struggle to pay off their hefty tuition bills for years afterward.

Luckily, there are some things parents and students can do now to help pay for education and reduce stress in the future:

Save early. In an ideal world, you would start saving for your kids’ education as soon as they’re born. This is difficult to do in the real world, especially with the increased expenses that come with a new child. Still, as early as you can start putting money into a 529 account. Those funds will grow tax free in the plan as long as you use the funds for approved college expenses.
Search out scholarships and grants. While your child’s school of choice may offer them some scholarships to defray their attendance costs, look for outside sources as well. There are innumerable organizations offering scholarships to students fitting their criteria. There are scholarships for kids who attended a certain high school, children of people in certain professions (like the military, law enforcement and others) and children whose parents have certain illnesses or disabilities. A little bit of online digging could uncover a wealth of resources to help pay for school.
Start your degree at a community college. Most states have a community college program that feeds into top state universities. Investigate the community college system near your home. It’s possible you’ll be able to spend your first two years of college paying a few hundred dollars per semester and then transfer your credits and collect your degree from the big name university. That play would allow you to get your degree for roughly half price.
If you get offered a scholarship, take it. You’d think that with college costs as high as they are, students would jump at the chance for a scholarship. But the “brand name” college experience has been, well, branded into our brains as being something so much better that it’s worth taking on piles of debt over essentially a free or half-price education at a smaller college or university. Balderdash! It’s a far smarter move to take the scholarship and get out of college with little or no debt than it is to get that Ivy League degree. Ten years after graduation, you’ll be really happy not to have an extra $100,000 of student debt weighing you down.