Updated 11/28/22: Since this blog post was published, payments and interest on federally-held student loans are now set to resume 60 days after a court decision on President Biden’s forgiveness program. If no decision has been issued by June 30th, 2023, payments will resume 60 days later.
As of Labor Day 2021, nearly 3 million people lost an extra $300 a week in unemployment benefits, which the federal government provided as the US economy shed millions of jobs. In total, 8.9 million people have lost their unemployment benefits altogether with 25 states ending benefits before Labor Day.
Student debt is a critical variable in many employees’ financial portfolios. As the CARES Act unemployment benefits wind down, and broad loan forgiveness appears increasingly unlikely, federal student loan payments are coming due in February as the final extension ends. This is a one-two punch for employees and their families, who will have to resume repayment of their student debt with less cash to cover the payments come February.
Maybe your team has tried financial well-being point solutions like on-demand pay, emergency funds, or automated savings, which are great pieces of a holistic strategy. Student loan debt can actually impact the effectiveness of these voluntary benefits, especially for employees with unemployed family members at home, oftentimes carrying student loans themselves.
Navigating the ROI of any financial well-being program can be tricky, but student loan solutions have clear short- and long-term impacts. Read on for five unexpected ways student loans solutions can improve your existing financial well-being strategy in the current climate:
Better Mental Health
The added financial stress of student loans can spill over into other areas of individual well-being, with lingering effects on mental health. Reducing the stress of student loan payments can make a huge difference in the sense of control people feel over their financial situations, and that can lead to less tension, less conflict, and more energy to put into self care.
Improved Short-Term Cash Flow
The average Summer customer saves $197 per month on their student loans. That alone isn’t going to replace a family member’s lost benefits. But, if every borrower in that family has some extra cash each month, it can mean the difference between staying on track with day-to-day needs and having to make painful trade-offs just to get by.
Higher Credit Score
Financial well-being can often have as much to do with a person’s credit score as it does with the number on their paycheck. Enrolling in an income-driven repayment is just one student loan solution that can raise a borrower’s credit score. That improvement could be a deciding factor in securing an auto loan or refinancing a mortgage. No matter how you look at it, better credit makes it easier for your employees and their families to not only weather hard times but to move up the economic ladder.
Stretching to cover a $300-per-week gap is going to push people to tap into their savings. The problem is, two-thirds of Americans have less than $1000 in savings as it stands, and two in five don’t have $400 in cash for an emergency. Making a major monthly expense like student loans more manageable is going to turbo-charge the efficacy of any automated savings programs you have in place and make it easier for your employees and their families to be ready for a rainy day.
Uninterrupted Retirement Planning
The everyday difficulties of the COVID era are hard enough to deal with, but when your employees are helping their family adjust to the loss of unemployment benefits, they may also be sacrificing their long-term plans. A five-year delay in retirement savings means nearly $80,000 less saved when you retire; a 10-year delay tallies to a $130,000 shortfall, on average.
This is not the time for your employees to be forced into trade-offs between saving for retirement and meeting their student loan obligations. Taking the pressure off of your workforce’s student loans will literally pay dividends for them, years after we’ve recovered from the effects of the pandemic.
Employers of Choice Will Define the New Normal
Individuals who have relied on government benefits for the last year and a half now must recalibrate their finances. This challenge is complicated by fast-approaching changes in the student loan landscape. While student loan solutions alone can’t replace lost unemployment benefits, they are the key benefit that unlocks the full potential of your financial wellness offerings. The multiplier effect they have on every other employee benefit means student loan solutions are a crucial tool for employers of choice who are committed to creating a healthy, financially robust and secure workforce.
To learn more about resources that can help your company better support your workforce holistically, request a Summer demo.