Employee Financial Wellness Programs Are Proven to Reverse Student Loan Paralysis

According to the Education Data Initiative¹, 47.9 million people across the United States – or approximately one in four US adults – owe money on student loans. This debt has risen to $1.75 trillion and is growing at 27.9% each year. 

The average student loan debt is over $37,000, and the average payment is $250 – often more than your employees can realistically afford to pay. Yet, even when making payments, 20% of borrowers see their student loan balance increase during the first five years.

Twenty years after starting college, almost half of borrowers still owe $20,000 or more. In fact, some professionals work their entire careers to repay their loans.

With debt like this, it is no wonder that your employees may be experiencing student loan paralysis.

Defining Student Loan Paralysis

UNC Greensboro and Rutgers University-Camden² found an interesting phenomenon that they called student loan paralysis. This occurs when those with student loans delay participating in typical life milestones due to their debt.

In other words, employees that delay or cannot afford to purchase a home, get married, have children, or save for retirement are suffering from student loan paralysis.

Keep Reading: Is Student Loan Debt a Roadblock to Retirement Savings?

The study followed college graduates with student loan debt to determine how the debt affected life decisions. What they found is that 88.7% of those with debt believe it has affected what they do and when they do it.

The most likely consequence was having to live with a parent or roommate, with 34.1% resorting to this arrangement to save money. However, having student loan debt also affected such decisions as:

• Buying a home (28.9%)
• Taking a vacation (28.9%)
• Getting further education (21.8%)
• Having children (20.4%)
• Getting married (18.3%)
• Purchasing a home (17.6%)

Additionally, nearly 15% of those surveyed are working at a job they don’t like simply so they can afford to pay back their loan. 

Student Loan Paralysis Affects Your Bottom Line

If these borrowers didn’t have debt, they claim they would be following a more traditional trajectory – getting married, buying a house, and having children.

Additionally, they would be paying off other debt, creating an emergency fund, and saving for retirement.

Instead, they stress over their financial state and bring that stress to work.

For example, one study³ found that a leading cause of absenteeism is poor financial wellness – and absenteeism costs US companies approximately $1.685 per employee⁴.

Unfortunately, this is not the only behavior associated with financial stress. 

Employees struggling with student loan debt may also exhibit behaviors like presenteeism, poor work performance, on-the-job accidents, low company loyalty, and poor interoffice relationships – all of which affects your bottom line. Those with financial burdens also tend to put off needed medical care which can lead to higher employer healthcare costs.

Thankfully, there is something employers can do to help.

Offer a Holistic Financial Wellness Program

An employee financial wellness program can help employees with student loan debt get on track and begin hitting financial milestones that make them happier individuals and better employees.

A holistic financial wellness program will provide information, tools, tips, resources, and coaching on such topics as:

• Budgeting
• Planning
• Saving
• Debt management
• Retirement

As employees begin to get a handle on their student loan debt, they can begin to hit the major milestones now and continue to make wise financial decisions in the future.

To learn more about Enrich and how it can help reverse employee student loan paralysis, request a demo today.

1 - https://educationdata.org

2 - https://sites.utexas.edu/contemporaryfamilies/2021/03/24/college-student-debt-brief-report/

3 - https://s2.q4cdn.com/997146844/files/doc_news/Fidelity-Research-Finds-The-Top-Two-

4 - https://www.cdcfoundation.org/pr/2015/worker-illness-and-injury-costs-us-employers-225-billion-annually