Home > Understanding the $1.7T Student Debt Impact On Your Workforce

Understanding the $1.7T Student Debt Impact On Your Workforce


There has been a lot of press about the impact of student debt on employees’ job decisions, retirement savings and overall financial wellness. In aggregate, Americans owe over $1.71 trillion in student loan debt, an amount second only to mortgages, spread out among about 44.7 million borrowers.1 According to the Federal Reserve, in 2005 the average monthly student loan payment was $227 per month. By 2016 that average had increased to $393, a 73% increase!

69% of students from the Class of 2019 took out student loans, graduating with an average debt balance of $29,900.1 Contrary to popular belief, student debt impacts more than just Millennials. Generation X has the highest student loan balances of any generation. The reason being is that many people in Gen X are juggling several different financial obligations: a mortgage, kids and/or helping aging parents. The generation with the second highest student loan balance are the Baby Boomers. Many are helping finance their children and grandchildren’s education. In fact, the Consumer Financial Protection Bureau (the CFPB) estimates that more than 57 percent of co-signers are age 55 and older.

As student loans have become more commonplace, few people have examined the role of gender in how much debt students take on. Women now earn 57 percent of bachelor’s degrees from American colleges and universities. An American Association of University Women study found that 44 percent of female undergraduates take on debt in a year compared to 39 percent of male undergraduates. This has led to women owing nearly 2/3rds of the outstanding student debt. Following graduation, women repay their loans more slowly than do men, in part because of the gender pay gap.

Another study found that average wealth for households with no outstanding student debt is more than four times higher than households with student debt, and that student debt can explain between 3% and 7% of the Black‐White wealth gap across the wealth distribution.2

Employees are now looking to work for employers who offer financial wellness solutions. A recent financial health study found that:

    • 74% of employees say it’s important for an employer to offer financial wellness benefits.


    • 71% of employees feel comfortable getting personal financial support from a resource at work.


    • 60% say they would be more likely to stay at a job that provided useful financial wellness programs.


      • 78% of employees with high financial stress say it distracts them at work3


    What Employers Can Do To Help Employees With Student Loans


    Provide Employer-Sponsored Student Loan Benefits

    Student Loan Repayment Assistance was made tax-deductible in March 2020 and the provision has been extended through 2025. Employers can now help pay down workers’ student debt, up to $5,250 per worker per year tax-free, saving workers thousands of dollars on their student loans.

    A new bill that was recently proposed, the Secure 2.0 Act, includes a provision that will allow workers with student loans to make payments toward their loans in place of contributions to their defined contribution (DC) plans and still receive an employer match.4 This way, workers would be paying off debt while saving for retirement at the same time, rather than having to choose how to stretch their dollars. This bill hasn’t been passed yet, but has received strong bipartisan support, so you’ll want to be prepared if it becomes law this year.

    Offer Voluntary (Free) Student Loan Benefits

    In addition to offering student loan repayment assistance, giving workers access to assistance and resources that enable good student loan decisions can go a long way in making sure they get the help they need. For example, 93% of the $1.71 trillion in student loan debt is owed to the federal government. The government offers several generous federal loan rebate programs for student loan borrowers. Unfortunately, these programs are unnecessarily complex for borrowers to navigate and therefore rejection rates are higher than they need to be. In one federal loan rebate program, the Public Service Loan Forgiveness program, rejection rates are as high as 99%.

    Federal student loan payments and interest have been suspended through September 2021 due to the COVID-19 pandemic. In just the first three months of this year, four new changes to federal Student Loan Cancellation & Forgiveness have been introduced.

  • Borrowers who have FFELP loans in default, will have wage garnishments and interest on defaulted loans frozen until September 30, 2021.5

  • Student loan borrowers with total and permanent disability will have their loans canceled.
  • Student loan borrowers who have either a) already received partial loan relief under the Borrower Defense to Loan Repayment Forgiveness Program or b) already had an application for borrower defense approved, will have their loans forgiven.6
  • Student loan forgiveness is tax-free after 20-25 years of qualifying repayments for any federal student loan borrower.

    While there’s been a lot of debate about whether the current administration will cancel student debt, the amount, timeframe and eligibility criteria may take months or even years to sort out. Providing your employees with student loan benefits or giving them resources to make the best decision for themselves can go a long way in attracting and retaining the best talent.

    About PeopleJoy

    Since its founding in 2016, PeopleJoy has provided student debt solutions for thousands of individuals, in partnership with leading institutions such as the Children’s Hospital of Philadelphia. PeopleJoy has an unmistakable passion for helping individuals figure out their student loans, and a strong commitment towards helping them achieve financial wellness.

    Emeka Oguh

    Emeka Oguh is the CEO of PeopleJoy, where he is currently developing solutions to address the student debt crisis. Emeka serves on the Board of Trustees for the quantitative Alpha Architect ETF funds and holds a Bachelor of Science in Electrical & Computer Engineering from Rutgers University and a Master of Business Administration from Harvard Business School.

    Connect With PeopleJoy on LinkedIn, Instagram, Twitter, or Facebook.

    [1] A Look at the Shocking Student Loan Debt Statistics for 2021, Student Loan Hero by Lending Tree
    [2] Does Student Loan Debt Contribute to Racial Wealth Gaps? A Decomposition Analysis, Venoo Kakar, Gerald Eric Daniels Jr., Olga Petrovska

    [3] The Case for Employers to Invest in Employee Financial Health by Morgan Stanley & The Financial Health Network, December 2018.

    [4] SECURE Act 2.0 Could Be a Game Changer for Retirement Planning, Syed Nishat, with Wall Street Alliance Group

    [5] FFELP Loans. FFELP student loans are federally backed loans that were originally funded by private companies. The FFEL Program ended with the 2009-2010 academic year to make way for federal Direct loans.

    [6] Borrower Defense to Loan Repayment Forgiveness. If your school misled you or engaged in other misconduct in violation of certain state laws, you may be eligible for “borrower defense to loan repayment forgiveness,” sometimes abbreviated to “borrower defense.” Only federal Direct loans are eligible for forgiveness under borrower defense.

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