The advantages of student loan employee benefits are plenty: offering student debt solutions reduces employee turnover, promotes gender and racial equity, creates tax incentives, and supports employees of all ages.

Of all ages? 

When you think about who benefits from student loan perks, you probably picture employees who finished college in the last decade or so. And it’s easy to understand why — the national conversation about student loans almost always centers on the 40-and-under crowd.

But this focus on Millennial and Gen Z borrowers leaves out a significant demographic: about 20 percent of Americans with student debt are over the age of 50, and their outstanding balance is growing faster than that of any other age group. Considering these borrowers’ limited remaining earning years and the growing number of workers who can’t afford to retire, student debt is a serious threat to older employees’ financial wellness — and HR leaders can help.

Why do so many Gen Xers and Baby Boomers have so much student debt? 

Plenty of borrowers who carry five- and six-figure student debt today were college-aged during an era when four years of tuition cost less than a single semester does now. So how did we get here? 

Some borrowers took out student loans to pay for a child’s education. The rising cost of higher education has caused younger borrowers’ debt to skyrocket — and if Mom and Dad helped out with additional student loans, they could still be paying off their child’s degree decades later.

As of January 2020, 3.6 million parents carried $96 billion in debt from federal Parent PLUS student loans. But the Parent PLUS program doesn’t exactly set families up for success: the interest rate is significantly higher than that of any other student loan and the loans aren’t eligible for federal plans that can lower monthly bills and cancel outstanding debt. 

But the majority of the student debt held by borrowers fifty-and-up is the result of the borrower’s own education: the economic climate has spurred record numbers of non-college-aged adults to go back to school in recent years, and many borrowers are still paying for it.

The Great Recession had an especially significant role in this rise. Undergraduate and graduate enrollment among adults aged 35 and older spiked during and after the downturn as laid-off workers sought to improve their job prospects. Nearly fifteen years later, many of those borrowers are now forty-, fifty-, and sixty-something, and still strapped with their student loans. 

And that’s not just because the average borrower takes 20 years to pay off their loans — adults who went back to school during the recession were particularly disadvantaged. Tuition rates spiked while graduation rates sank, leaving many deep in debt and without a degree. Hit harder still were the hundreds of thousands of students at for-profit colleges, lured in by exaggerated promises of hireability only to struggle to find work and pay off overpriced degrees. 

How does student loan debt impact retirement? 

The main concern posed by the number of older Americans with student debt is obvious: more money spent on student loan repayment means less financial security during retirement.

But the impacts of student loan debt on these employees’ retirement plans highlight deeper problems behind the retirement crisis, starting with the sheer lack of preparedness. The median 401(k) balance of Americans age 56 to 61 is just $21,000. While Social Security benefits help make up the difference, low savings all but doom retired borrowers with remaining student loans to default — at which point the government can garnish Social Security income to repay outstanding debt. 

Another systemic issue emphasized at the intersection of student loans and retirement is that of the racial and gender wealth gap. Women and people of color have significantly lower retirement savings and are disproportionately burdened by student loan debt — inequities that will continue to collide as the retirement and student debt crises worsen. 

How can HR leaders help older employees navigate student debt?

Providing resources to help employees over 50 manage their student loans is a social imperative, but there’s also a strong business case for taking action. HR leaders can help employees navigate this critical issue by providing personalized, intuitive student debt management benefits — and by doing so, they’ll: 

  • Leverage upcoming retirement policy while breaking the cycle of long-term student debt. In 2020, the CARES Act opened the door for employers to make up to $5,250 in tax-advantaged contributions towards an employee’s student loan debt each year — and more major legislative changes are on the horizon. When passed, the Secure Act 2.0 will allow employers to match the amount an employee contributes to their student debt payoff as a contribution to the employee’s retirement account. Offering student loan repayment assistance and management solutions now helps employers get ahead of shifting retirement policy while also setting more employees up for long-term success sooner. 
  • Reduce stress and improve productivity. Financial stress costs employers 47 hours of lost productivity per worker per year — and money-related stress is on the rise among American households, especially when it comes to retirement and student debt. Student loan benefits address one of the most universal financial stressors and wins back lost costs. 
  • Save on people costs and support a higher quality of life. Employees with student debt are more likely to keep working after they reach retirement age — but an employer’s workforce costs go up by as much as one-and-a-half percent for every year their average retirement age increases. Helping employees get ahead of their student debt saves employers money and improves workers’ quality of life in the long run. 

Want to learn more about bringing student debt benefits to your organization? Request a demo to learn more about what Candidly can do for you.