The Impact of Student Loans
At the end of 2024, 42.7 million student loan borrowers shared the burden of nearly $1.7 trillion in federal student loan debt. That means one in four workers in the U.S. has student loans (Source: ADP Research Institute).
- Personal finances are the primary source of stress for both public and private sector employees (Source: MissionSquare Research Institute).
- 93% of private sector employees and 89% of public sector workers with student loans consider their debt levels problematic.
- Student loans are considered a major problem by more than 44% of U.S. workers who carry student debt.
- 43% of borrowers are behind on payments, with more than 9 million on the path to default by the end of 2025 (Source: Bloomberg).
- Credit scores are dropping by up to 200 points, affecting employees’ ability to secure loans, mortgages, and more (Source: Forbes).
Types of Student Loan Repayment Benefits
There are a variety of student loan repayment benefits that you can offer your employees. Some options have a financial aspect, helping employees pay down their debt more quickly. Others are focused on reducing confusion and helping employees take advantage of repayment programs that make payments more manageable or offer forgiveness.
The most common student loan repayment benefits include:
- Making contributions to employees’ student loans. Employer contributions up to $5,250 annually are income tax-free for employees and payroll tax-free for employers when provided as part of an educational assistance program.
- Making matching contributions to employees’ retirement accounts when they make student loan payments. The SECURE Act 2.0 was implemented in 2024. This legislation allows employers to treat employees’ qualified payments toward student loan debt as if they were 401(k) contributions for matching purposes. Prior to this change, people often missed out on employer match opportunities because they had to prioritize repaying their student loans over funding their retirement accounts. Employees can pay off their own loans (or a spouse’s or dependent’s loans) while also receiving their employer retirement match.
- Offering personalized student loan counseling. Navigating student loan repayment is no small feat. There are numerous federal repayment plans and forgiveness options with varying requirements, and there have been many changes in recent years. Offering personalized student loan counseling can help ensure employees choose the best repayment option to meet their unique financial goals.
Student Loan Repayment Benefits and Financial Wellness
The impact of student debt goes beyond financial strain, significantly affecting borrowers’ lives and well-being. Even those meeting monthly payments often make sacrifices such as delaying major life milestones.
This financial stress contributes to a lack of energy, loss of focus, reduced creativity and can even have negative effects on personality (Source: business.com). When combined, these symptoms can also have a dramatic impact on a business’s bottom line. An employee with financial worries may spend an average of 156 hours, or 19.5 days distracted from work (Source: Graystone Consulting from Morgan Stanley). Those hours can really add up, and are estimated to cost U.S. employers over $4 billion in lost productivity (Source: HR Morning).
Besides productivity losses, financial stress also contributes to employees seeking jobs elsewhere to find relief. Job seekers value organizations that provide financial wellness assistance, whether it’s through monetary support or tools and resources designed to help with their finances (Source: HR Morning).
The Value of Offering Student Loan Repayment Benefits
In addition to providing a sense of well-being to your employees, student loan repayment benefits are key to attracting and keeping the best employees. By addressing the concerns that other employers don’t, you can avoid the financial and cultural costs of turnover.
- It’s a win-win if you’re seeking to build and maintain the highest quality team, and a stress-relieving perk for employees who have student loan debt.
- 55% of job seekers turned down a job at least one to three times due to dissatisfaction with benefits.
- 88% say they would increase their commitment to their employer if offered student loan repayment benefits.
- Employees will feel less financial stress, more easily reach financial goals, and be able to save for retirement.
- Payments, up to $5,250 annually, are tax-free within the context of an Educational Assistance Program (EAP), meaning they do not qualify as taxable income to employees nor as a taxable expenditure to employers.
