Does it seem like more grads have more student loan debt than ever before? That’s because they do.
According to a recent report from the Consumer Financial Protection Bureau (CFPB), the percentage of student loan borrowers owing $20,000 or more at the start of repayment has more than doubled since 2002. On top of that, many grads are waiting longer to start repayment, and taking longer to pay off their student loans.
With many younger workers wringing their hands over student loan debt, and employers wondering how to attract top millennial talent, there’s an opportunity. What if more companies offered student loan repayment benefits — and the government offered a tax benefit? Here’s why a rise in graduates with more student loan debt should motivate employers to offer student loan repayment benefits.
Why do so many people have student loan debt?
Gone are the days when someone could work for a summer and cover tuition for the entire year. According to the Bureau of Labor Statistics, the Consumer Price Index for college tuition and fees increased 63 percent between January 2006 and July 2016. Compare that to an increase of 21 percent for all items — and that’s just tuition and fees. Housing at school (excluding board) increased 51 percent.
That’s a pretty big jump over 10 years. College Board tracks changes in average tuition and fees over time. In 2001-02, the average public four-year, in-state tuition and fees plus room and board was $12,245. The average cost for the 2016-17 school year? $20,092.
No wonder the CFPB reports that more than 40 percent of student loan borrowers leave school owing $20,000 or more. Just paying for one year of school costs that much. The number of borrowers owing $50,000 or more upon leaving school tripled between 2002 and 2016. There’s a reason some experts are worried about a student loan bubble.
Graduates feel the pinch of student loan debt
It’s no surprise that graduates are feeling the pressure. A Student Loan Hero survey found many Americans with student loan debt put off key financial and life milestones as a result of their student loan debt.
Millennials also cite “too much debt” as their number one money stress. Student loan debt is the second-most stressful type of debt they carry (after credit card debt). Add in the fact that wage growth — even for those with a college degree — has been largely stagnant in recent years, it’s not hard to see why millennials struggle.
And it’s not just millennials suffering as a result of this situation. The combination of rising college costs, higher student debt, and stagnant wages has also contributed to student borrowers waiting longer to pay off debt. The CFPB report found that half of student loan borrowers are older than 34 when they start repayment. Plus, the percentage of consumers beginning repayment under 25 has decreased from 30 percent to 15 percent.
Finally, 30 percent of borrowers are not paying down their loan balances after five years in repayment. “[E]ven if borrowers are making payments, those payments are not enough to cover the interest on their loans. Therefore, the amount of principal is the same and the overall amount of debt is the same or more,” said the CFPB in its press release.
All of this represents an opportunity for employers to step in and help their workers pay down student loan debt.
Companies that pay off student loans attract and retain talent
It’s clear that their financial situation stresses American workers — for 53 percent of them, that stress gets in the way of work performance. On top of this productivity issue is the worry about turnover as millennial talent is difficult to retain. Polling organization Gallup estimates that millennial turnover results in a loss of $30.5 billion to the U.S. economy every year.
Employers looking to retain millennial talent and increase worker productivity can offer student loan repayment benefits. Offering these benefits can provide companies a way to reduce financial stress related to student loans, and encourage millennials to stay.
However, companies have been slow to adopt student loan repayment benefits. According to the Society for Human Resource Management, only 4 percent of employers offer financial aid to help employees repay student loans. This represents a huge opportunity for employers who want to stand out in the competition to attract millennial talent.
How to motivate employers that don’t offer student loan repayment benefits
The government can even help if Congress passes a law to provide companies with a tax benefit for offering student loan repayment benefits. Currently, a bill meant to extend tax exclusion to employer-provided student loan payments languishes in the House of Representatives without moving forward.
Even though there isn’t an extra tax break for this benefit, there are some companies that pay off student loans. Student loan borrowers looking for help with their student loan repayment can consider these employers, which include powerhouses Fidelity and PricewaterhouseCoopers, as well as fintech startups such as Student Loan Hero and SoFi.
Whether you are a business owner or a student loan borrower, consider contacting your elected officials to encourage them to help borrowers and employers alike by passing bills that provide tax breaks for student loan repayment benefits.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.57% – 6.97%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|