Testing the water: How deep will organizations dive to address employees’ student loan debt?

A young man in a sweater sitting at a desk in an office working on a laptop

Some days, it feels as if I can’t read the news without seeing some statistic about student loan debt — from what the average student carries after graduation, which is now more than $37,000, to other startling national statistics with “trillion” in the title. Most recently, I read an article about how grandparents are being saddled with significant debt and perhaps delaying retirement.

I was fortunate to earn my undergraduate degree without debt. But, I then took $20K+ in loans for graduate school without any thought about how I’d repay them. While it wasn’t an enormous amount of debt, especially by today’s standards, I vividly recall the consternation I felt when I saw it on a spreadsheet.

High debt loads affecting employee wellbeing

Financial stress can take its toll on people, affecting everything from our health to our productivity at work. According to findings from our recent Global Benefits Attitudes Survey, employees with financial troubles are twice as likely to be in poor health as those who say they aren’t worried about finances. And that stress can not only affect productivity, but morale, focus and engagement.

Employers have taken notice and want to help employees become more financially secure by offering programs to address financial concerns, including student loan debt, into their wellbeing programs.

I’ve spent a lot of time talking to employers about student loan debt and how to address it through the various services vendors provide — from online debt dashboards and counseling services to refinancing options and employer contributions. What I’ve found is that employers for which this issue resonates tend to fall into three areas of thought when it comes to addressing student loans. Those include:

1. Dipping a toe in the water These are employers that have committed to providing tools for employees (e.g., dashboards, counseling and refinancing and consolidation options), but have yet to provide employer contributions to employee debt. Each one of our clients looking at this model wants to leave the door open for the possibility of contributions at a later date. Findings from the recent Willis Towers Watson Best Practices in Health Care Employer Survey indicate that about 47% of large employers expect to offer some form of student loan debt counseling or decision support by 2019, with 38% saying they expect to offer support via offering preferred vendors or negotiated refinancing rates.

2. Doing laps Employers in this lane are making contributions to employee loans and generally setting their models to pay a certain amount per month. The key is modeling the potential cost and making a case to leadership. Many are tying contributions to service and job performance. Our data indicate that only about 9% will have this in place by the end of 2018 and another 18% are planning for 2019; clearly still a nascent benefit.

3. Jumping from the high dive – These are the employers looking at innovative solutions – such as what Abbott Laboratories has done with its 401(k) model, or other clients looking at tiered models or even combination needs and merit-based programs.

So what can employers do?

When talking about any new policy or program, the fundamental question is, “What problem are we trying to solve?” Once the business objectives, the employer’s value framework and employee needs are clear, the question is one of degree. Actual repayment assistance can rapidly become a significant new cost, but a well-structured program pays dividends by making an employer more appealing for new hires and increasing retention levels in a competitive market – all by showing concern for the wellbeing of its workforce.

Does it make sense to start gradually and add more program features over time, or is the need to dive in the deep end of the pool substantial enough to warrant aggressive action? In every instance, it’s smart to frame the decision within a broader financial wellbeing construct and clearly aligned with organizational values as well as the employer’s overall wellbeing strategy.

Many employees are drowning in debt and struggling to find answers. Undoubtedly employers can help. The question is whether to dive right in with a rescue or begin by extending support to help employees get their heads above water with education, planning and resources.

No single solution will be appropriate for every employer, so the ultimate goal is to analyze both the need and the desired outcome before considering design and cost options and finally finding the right vendor partners.


 

 

Lydia Jilek headshotLydia Jilek is a senior consultant for Health and Group Benefits at Willis Towers Watson.

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