Student loan debt has reached epic proportions, now reaching $1.6 trillion, and is the fastest-growing debt in the United States.1
In fact, two-thirds of college seniors graduate with debt averaging $29,200.2
According to a recent Moody’s Investors Service report, the reason for the continued growth of student debt has changed.3
For years, this debt increased due to higher college enrollment rates and tuition costs. However, student enrollment is now in decline, and tuition costs are more in alignment with income.
The reason for the burgeoning debt is now due to slow repayment.
The report shows that only:
- 3 percent of student loan debt balances are eliminated each year
- Half of 2010 to 2012 borrowers reduced their balances in the past five years
- A quarter of balances are currently being repaid in 10 years or less
The impact of student loan debt affects not only individuals but society as a whole.
Young, and not so young, employees stress over the ability to make monthly payments while, at the same time, create emergency and retirement savings accounts.
In many cases, these individuals choose to defer investments such as buying a home or starting a business, thus limiting their future economic growth and potential.
And those who default on their loans limit their opportunities even further.
Student Loan Debt Hurts Diverse Populations Most
However, studies have shown that student loan debt does not affect everyone equally.
African-American students and other minorities often take on more debt than their white counterparts to earn the same degree.
- 85 percent of black students graduate with student loan debt, compared to 69 percent of white students4
- 55 percent of black male borrowers and 35 percent of Latino male borrowers default on their loans within the first 12 years, compared to just 21 percent of white male borrowers.5
- 31 percent of black families have student loans compared to 20 percent for white families, despite more white students attending college6
This type of debt affects minority families for years. One study shows that white families with a bachelor’s degree have a $400,000 net worth, almost six times that of a black family with a bachelor’s degree.7
The causes for this disparity are complex, but, in the end, black students take out more loans and are less likely to find the type of employment that will help them reduce their debt quickly.
Thankfully, employers can make a difference.
Loan Repayment Programs Boost Diversity
U.S. employers now have the ability to help employees with their student debt through financial wellness programs that include student loan repayment assistance.
The Society for Human Resource Management (SHRM) found that while only 4 percent of employers offered student loan repayment assistance in 2018, that number increased to 8 percent in 2019.7
In addition to helping their employees reduce financial stress, such student loan debt repayment programs typically improve company diversity.
Such a program will attract young minorities to the companies that offer them since they struggle disproportionately with student debt.
And diversity is a good thing for employers.
Studies have shown innumerable benefits to having a diverse workforce, including:
- More innovation8
- Development of more relevant products8
- 19 percent more revenue8
- Greater adaptability8
- Better business decisions9
- Make decisions more quickly9
- Executed decisions lead to better results9
These benefits are a consequence of a variety of insights and perspectives that allow teams to see problems and solutions from multiple angles.
Doing so makes solutions stronger and affects an employer’s bottom line.
How Financial Wellness Benefits Support Employee Repayment Programs
At Enrich, we work hard to support our clients as they work hard to support their employees.
That’s why we’ve produced an education-centric initiative that includes an interactive course to use in conjunction with our student loan tools. The student loan tools help educate employees about their loans, while the course helps educate employees about the process and value the student loan benefit offered by the employer.
In addition to our student loan repayment benefit program, Enrich also encourages companies to provide access to student loan refinancing options.
Although employer-sponsored student loan repayment will not solve the debt crisis, it is a concrete step that can help all employees struggling with student debt while bringing diversity to the workplace.