As employers navigate the current crisis caused by COVID-19, many are re-evaluating their benefits and in some cases reducing the benefits employees rely on. But as employers strive to manage their bottom line, there are low-cost, high-impact benefits they can – and should – consider.
When determining which benefits will benefit employees the most, employers should consider what causes the most stress. For example, employees who worry about their financial health are often less productive when they are at work. Almost 78% of employees suffering from high financial stress report that they are distracted by this stress at work.
Therefore, plan sponsors and benefit administrators may want to consider one of the biggest financial hurdles employees face, especially in the nonprofit sector: student debt. In the United States, student debt is at an all-time high, hitting $ 1.6 trillion this year.
The 2020 TIAA Nonprofit Student Debt Survey found that student loans cause at least some stress for over 61% of those who carry them. In fact, 75% say they associate negative feelings with their loans, including 41% who feel frustrated, 34% who feel hopeless, 26% who feel angry and 22% who are ashamed.
The burden of repaying student loans can negatively impact other areas of financial management. Paying off a student loan can be a financial barrier for many people, and even under normal circumstances, borrowers may find it difficult to consider saving for retirement. A large majority of U.S. adults (84%) who currently pay off student loans say student loans negatively impact how much they can save for retirement, according to a 2019 survey by MIT AgeLab and the TIAA. In TIAA’s recent Financial Resilience Survey, 40% of employees aged 25 to 39 say they want education, tools or advice to help manage student debt.
In response, TIAA has partnered with social impact startup Savi to make it easier for nonprofit client institutions to offer meaningful student debt relief services to their employees. TIAA and Savi piloted the solution from July 2019 to March 2020 with seven nonprofits, four in higher education and three in healthcare. During that time, employees who signed up for the solution were on track to save an average of $ 1,700 per year in student debt repayments. Payments for some employees have been cut in half. Additionally, employees had an expected average discount of over $ 50,000 after successfully completing 120 months in the PSLF program.
Student debt management programs also boost employee retention. The 2020 TIAA Nonprofit Student Debt Survey also found that tools like Savi improve retention, positivity, and loyalty with employers. If Savi were offered by their employer, 82% would feel more positive about their employer. Additionally, 78% say it would impact their likelihood of continuing to work for their current employer for the foreseeable future.
As we all go through the impact of COVID-19 on the U.S. economy, putting the financial well-being of employees first is critical. Student debt is still a priority for employers, but COVID-19 has created an environment that highlights the growing number of financial burdens on employees. As student debt continues to be a major distraction for employees, providing a tool to help ease the burden can inspire them to stay longer or increase their productivity.
There has never been a more important time to provide employees with the resources they need to manage student debt while supporting their retirement planning. By offering a hard-hitting student loan and other financial wellness tools, employers can begin to improve the overall financial well-being of their employees.