With 70% of today’s graduates facing student loan debt as they enter the workforce, the financial picture for the average employee has changed completely.
The long-term achievements like first homes, cars, and retirement can get eaten away or severely delayed by the modern phenomena of student loan interest.
It’s hard enough for most working professionals to understand student loan repayment. If you add the impact of interest to the complex puzzle of 70+ options, most opt out and surrender to quick decisions. This can cost them hundreds of thousands over time without the right help.
So, which employee groups need the most help getting ahead of interest? Here are five that are easy to spot using your company’s data or a short Student Loan Survey.
1. HIGH DEBT HOLDERS | SUPER SKILLED GEN X-ERS
When trying to spot employees that might be held back by student loan interest, the biggest balance holders are the best place to look.
Many believe that student loan debt is a Millennial issue; however, Generation X actually holds the greatest amount of student loan debt at 50%. Their big balances quickly evolve into (seemingly) never ending payments and delays in reaching major life benchmarks like buying a home, according to the National Association of Realtors and Americans for Student Assistance.
2. “ETERNAL” REPAYERS | MILLENNIAL AVOIDERS
The “Eternal” Repayers consistently aim for lower monthly payment rates in an attempt to “save” money each month. According to data, this group is mostly fueled by millennials who’ve come to view student loans as a “fact of life.” Unfortunately, this group could spend the most on student loans over the long term. If an eternal repayer extends repayment from 10 years to 20 years on a $30,000 loan, he or she could spend an estimated additional $10,000 in interest alone.
So, what’s the problem? That $10,000 spent on student loan interest, if invested in a 401K with a 3% return rate from age 25 to 65, would be an additional $32,620 at retirement.
While these employees are saving in the short-term, without a smarter repayment plan or a company match they could be wasting tens of thousands of dollars over time.
3. THE ILLUSIVELY UBER-EDUCATED
According to the The Condition of Education 2016 report by the National Center for Education Statistics, between 2004 and 2014 the number of master’s degrees conferred increased by 34 percent. In addition, doctorate degrees awarded jumped by 41 percent.
Chances are the vast majority of these graduates, who contribute to the most educated U.S. workforce to date, did not start paying their student loans until they graduated. As a result, they are more prone to high balances and varying interest rates that could cost them if they don’t get help.
WHY INTEREST-TACKLING IS IN HUMAN RESOURCE’S BEST INTEREST
Student loan interest seems like a small issue for companies. The truth is that these dollars add up to big debt stress for employees, manifesting in the form of heart attacks, anxiety, and skyrocketing health costs.
To learn how you can help your employees avoid unnecessary interest and get ahead of student loans, contact us to see how to help #crushstudentloans and how much it costs.