More Employers Should Offer Student Loan Repayment Assistance
Fall is an exciting time for students and families across the country. It is a time to celebrate a new academic year, dream about the future, and embark on the next chapter of their education. Unfortunately, for far too many students, the start of the school year also means adding to the already massive burden of student loan debt.
The class of 2016 graduated with the most student loan debt of any graduating class in history. The average graduate had more than $35,000 in loan debt, up 6% since 2015. This past year’s graduates, about 70% of whom needed to take on some amount of student debt to pay for their education, will join the approximately 40 million Americans currently struggling with a total of $1.3 trillion student loan debt, collectively. While students can now borrow at historically low interest rates, more must be done to help graduates pay down this debt.
Substantial student loan debt is not only a burden for graduates, but it hurts our economy. It stunts economic growth and threatens the financial security of millions of individuals and families. Student loan debt results in fewer people starting their own business. It causes individuals to put off major life decisions, like getting married and having children. It delays major purchases like buying a new car or a first home. And it impedes retirement savings, especially for millennial workers, who are not able to afford to make their monthly loan payments and save for the future. Because of student loan debt, a generation of people who should be building and investing in the future, are instead forced to delay those decisions until their student loan debt is under control.
Fortunately, a small number of employers have decided to take the lead and begin offering student loan repayment assistance, and more should follow suit. Employers offering student loan repayment assistance not only help attract and retain top-level talent, but they also send a message that employers know they receive the benefit of an educated workforce and are willing to contribute.
Only 3% of U.S. employers currently offer some form of student loan repayment assistance. This number needs to grow, and quickly.
Several pieces of legislation now pending on Capitol Hill would empower and enable such efforts and encourage more companies to help employees pay down student loans.
These bills, the Student Loan Repayment Assistance Act and the Employer Participation in Student Loan Assistance Act, are bipartisan proposals that incentivize employers to help graduates pay down student loan debt through a tax-exempt benefit. This will help graduates pay down their loans more quickly and help businesses attract and retain young talent.
Recent studies have shown employer-provided student loan repayment assistance has long-term benefits. If an employer provides $100 a month towards student loan debt, it can shorten a ten-year loan by more than three years, saving over $4,000 in interest. By speeding up the repayment process, graduates will be able to make investments that grow the economy like buying a home, starting a family and putting away money for retirement. It will also encourage more students to invest in their education, giving our country the highly skilled workers we need to be globally competitive.
Student loans now represent the second largest form of personal debt, so we must find innovative ways to address this problem. While these pieces of legislation won’t solve this issue entirely, they’re certainly a good first step that will be beneficial to graduates, employers and taxpayers. The bills mean millions of employees with more money to spend, more money to save, and more money in our economy creating fewer defaults, and a more sound financial future for our country.