Employers are seeking to assist workers with student loan debt for purposes ranging from altruistic to improving their bottom line, according to a new EBRI Issue Brief.
In “How Employers are Tackling Student Loan Debt: Evidence from the EBRI Employer Financial Wellbeing Survey,” better employee retention (56%), less employee financial stress (49%) and greater overall worker satisfaction (41%) topped the list of reasons employers offer a financial wellness initiative. Yet evidence from EBRI’s survey also shows that employers are struggling with the complexity of financial wellness programs.
“It’s a competitive job market, and employers are seeking new ways to attract, retain, and satisfy qualified employees,” explains EBRI President and CEO Lori Lucas. “At the same time, student loan debt assistance programs are new for employers and they are still trying to figure them out.”
Using findings from EBRI’s 2018 Employer Financial Wellbeing Survey, the issue brief examines the characteristics, driving factors and financial wellness success measures of employers engaging with employees on student loan debt, and compares this subset to the typical employer survey respondent focused on financial wellness initiatives in general.
Drag on Financial Wellbeing
As background, EBRI notes that the percentage of American families with student loan debt has more than doubled since 1992, from 10.5% to more than 22% in 2016. What’s more, the percentage of families with student loan debt is much higher when the head of the family is younger than 35 – nearly 45% of that cohort had student loan debt in 2016.
Such debt can also have a bottom-line impact in the workplace, EBRI explains, further noting that employers have linked workers’ need for higher salaries to pay off student loan debt to challenges in attracting and retaining workers. Policymakers are also taking note of the impact student loan debt can have on overall financial wellness and are pursuing various initiatives.
As such, about a third (32.4%) of the employers responding to the survey reported offering or planning to offer some student loan debt program, such as a student loan debt consolidation or refinancing service or a student loan repayment subsidy that is employer paid.
These “student loan debt focused employers” were more likely than the typical survey respondent to have taken steps to measure the financial wellness needs of employees, including examining existing employee benefit data (68%), surveying employees (56%), holding focus groups (46%) and analyzing other quantitative employee data (45%). When it comes to considerations in determining whether to offer financial wellbeing initiatives, these employers also were less focused on cost to the employer than the typical survey respondent, registering at 39% compared with 50%.
In addition, nearly half (48%) of employers focused on student loan debt reported spending less than $50 annually per employee on their wellness initiatives. Yet one in five were unsure of the cost of their financial wellness initiatives. These employers were also somewhat more likely than the typical survey respondent to be either the source or provider of the financial wellness initiatives (33%) or to have a contracted financial wellness vendor (30%). However, EBRI notes that, as with the typical survey respondent, the likeliest provider or source was a mix of methods (41%).
Complexity of the programs was cited as the number one challenge in offering financial wellness benefits in the workplace, with nearly half of student loan debt focused employers citing this as a reason (49%), compared to 44% of the typical survey respondents. Challenges in making the business case to management (45%) and lack of interest among employees (43%) were also cited as top challenges, according to the results.
“Measuring the success of financial wellness programs – including those oriented to student loan debt – is important in making the business case for offering them,” Lucas explains. “As employers refine their approaches to measuring the impact of their financial wellness initiatives, they may be able to better draw lines between money expended for these programs and reductions in costs associated with turnover, absenteeism, and health care claims.”