How Employers Can Help Employees Manage Student Loan Debt

Student loan borrowers hold a collective $1.6 trillion in debt. While the debt, at one point, was a tool used to afford a college degree, many borrowers find it harder than previously expected to pay back the money. Student loan debt has become such an issue that the Biden Administration has been attempting to cancel up to $20,000 in student debt per eligible borrower and has continually extended the student loan repayment pause.

While borrowers may not see federal relief just yet, they might still be able to get some sort of help managing the burden of their loans through their employers. Employees spend so much of their time in the workplace, which has already taken steps to assist employees with other aspects of their financial health — like saving for retirement through a 401(k) account.

And according to Barrett Scruggs, the VP of Workplace Financial Well-Being at SoFi at Work, many people believe that their employer should be on the hook for giving them the help they need with navigating their student loans.

“A study we conducted at SoFi at Work found that 84{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9} of employees believe their company should be responsible for employees’ financial well-being,” Scruggs says. “Employees say it impacts their mental health, physical health, reduces productivity and limits their ability to focus. In fact, most employees are spending an average of 9.2 hours a week on their personal finances while at work — that adds up to more than a full work week each month!”

The positive ripple effect of employer action can help with an employees emotional and financial well-being, but also potentially make employees more engaged and productive over the long-term, since workers aren’t constantly stressed about their personal finances.

“Employers are increasingly offering student loan contribution plans as a direct way to help borrowers pay down student loan debt,” Scruggs says. “Like retirement contributions, these programs allow employees to dedicate a percentage of their paycheck toward student loan repayment with a match from their employer.”

Besides offering a matching amount from employers, these kinds of programs allow employees to automate the decision to put money aside to make student loan payments. Having to manually save money increases the likelihood that you may put away less than you would like or even spend the money on something else. These programs, which follow a similar methodology to 401(k) contribution plans, essentially remove any opportunity to spend the money elsewhere.

According to Scruggs, such contribution plans have seen an increase in adoption since the CARES Act, which allows businesses to contribute up to $5,250 tax-free each year through 2025 to help employees manage student debt.

Scruggs also says that employers can also offer tuition reimbursement programs to help employees seeking additional education pay for the cost of that degree.

“Offering this support helps employees avoid taking out large student loans in the first place — and it’s a win-win for the employer as employees are gaining new skills and knowledge to apply at work,” he explains.

Of course, these kinds of interventions are quite robust in their offerings and likely won’t happen overnight. Employers would need to spend significant time planning the logistics of these program implementations before offering them to employees.

“They should also direct employees to studentaid.gov to keep up to date on student loan forgiveness, forgiveness programs like PSLF and more,” Scruggs says.

If you’re unsure of what resources your company offers in terms of student loans (or any other financial area), you can double check your employee handbook, since that’s where most information around such offerings is likely to be. Or, you can speak with your HR department, or the company’s People Team. If your company has a direct line to their benefits center, you can also reach out directly.

You should then figure out what type of repayment plan you’d like to enroll in. The Federal Student Aid website outlines all the options. Some borrowers opt for refinancing their student loans.

When you refinance your student loan, you essentially replace it with a different loan with a lower interest rate and better repayment terms. This move should save you money over the long-run and make it easier to pay off your balance sooner. However, note that if you refinance federal student loans you’ll lose federal protections, like the current student loan payment freeze and potential student loan forgiveness.

Select ranked SoFi as the best overall student loan refinancing service and ranked Citizens Bank as the best option if you need a co-signer.