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Individuals With Student Loan Debt Are Facing “Unprecedented Financial Challenge,” New Research Finds

FRCB | October 17, 2017

Individuals With Student Loan Debt Are Facing “Unprecedented Financial Challenge,” New Research Finds

90% With Outstanding Student Loan Debt Say A Student Loan Repayment Benefit Would Positively Impact Their View Of An Employer

Stress On Borrowers Is Creating A New Opportunity For Employers To Provide Relief By Offering A Student Loan Repayment Benefit

Significant student loan payments are creating an “unprecedented financial challenge” for borrowers, but the issue also presents employers offering a student loan repayment benefit an opportunity to provide relief and gain a clear advantage in recruiting employees, according to new research by the consulting firm Oliver Wyman.

The analysis, commissioned by Gradifi, a leader in student loan repayment benefit programs for U.S. employers, for the first time revealed the significant mismatch between what most employers are offering in a benefits package and what younger workers want.

The research, based on a survey of more than 3,000 working professionals across the U.S., found that 45% of the respondents with outstanding student loan debt consider a student loan repayment the single most compelling employee benefit among six potential options, including additional retirement and health care contributions.

The analysis also quantified the high level of anxiety associated with student loan debt. Eighty percent of the working professionals surveyed with student loan debt say it is a source of “significant” or “very significant” stress.

“People with student loan debt are carrying a serious financial and emotional burden,” said Tim DeMello, Founder and CEO of Gradifi. “The pressure of making big monthly loan payments is taking its toll in terms of stress, housing affordability and quality of life. For employers, the research makes crystal clear that a student loan repayment benefit can create a decisive hiring advantage in recruiting highly skilled workers, while offering much-needed relief to borrowers.”

A student loan repayment benefit has become a higher priority than additional employer retirement contributions and a clear differentiator for employers offering a solution. Today, only 4% of employers currently offer student loan repayment assistance as a benefit.

For an employee with a loan balance of $26,500 – the median amount borrowed for a bachelor’s degree – a $100 per month employer contribution for a loan at 4% over 10 years would save over $10,000 in principal and interest. This employer contribution would result in a 30% reduction in total payments, and the loan would be paid off three years faster.

Gradifi’s SLP Plan™ benefit enables employers to make a monthly contribution to pay down an employee’s student loan debt. Employers can also extend that benefit to parents who have borrowed to pay for their children’s education.

Among the report’s other key findings:

58% of those with outstanding student loan debt said they prefer their employer help them pay down their student debt rather than make additional contributions to their retirement savings.
90% of those with outstanding student loan debt said a student loan repayment benefit would positively impact their decision to accept a job offer, to recommend an employer or to stay at their current employer.
High student loan payments are making it more difficult to afford housing in many urban centers, where jobs are located. The typical loan payment for a graduate with a bachelor’s degree is $265 a month. For a medical school graduate, it’s $1,600 a month.

Research Methodology

The study was commissioned by Gradifi and fielded by independent leading global management consulting firm Oliver Wyman. The study included a consumer survey of 3,002 American households in May 2017. The survey focused on working professionals that had a bachelor’s degree or higher, were between the ages of 18-50, and were either employed or seeking employment.

About Gradifi

Gradifi is a best-in-class, student loan repayment solution addressing the nation's student loan problem. Gradifi helps organizations attract and retain talent by enabling employers to make direct contributions to their employees’ student loans and accelerate the pay-off of the debt. Endorsed by the American Bankers Association’s Corporation for American Banking, Gradifi works with more than 150 companies across the U.S. To learn more, visit www.gradifi.com or twitter.com/gradifi.