Employers recognize need for solutions that address employee student debt post COVID-19

It’s no secret that America is facing a student debt crisis. An estimated 44.7 million Americans have outstanding student loan debt totaling $1.54 trillion, as of March 2020.

The global pandemic has made this crisis even more of a challenge, especially for those in health care.

A new survey shows that more than 90 percent of health care workers expect that they will struggle to make their student loan payments in six months. As such, there has never been a more important time to support employees in managing student debt, ranging from postponed payments through loan forgiveness.

Here at Boston Medical Center, the largest safety-net hospital and busiest trauma and emergency services center in New England, we’ve prioritized student debt support in our recent benefit offerings.  In line with what’s happening nationally, many of our clinical and administrative team members are burdened with the high cost of student loans, which can be a considerable distraction on top of the challenging roles in our very busy hospital.  For example, our 750 medical residents will likely emerge from their training as physicians with an average debt load of $161,772.

Fortunately, one solution for employees who work in a qualifying public service organization, may be Public Service Loan Forgiveness (PSLF). This program, established under the College Cost Reduction and Access Act of 2007, permits Direct Loan (DL) borrowers to have the remainder of their balance forgiven, if they meet certain criteria.

While PSLF is an important program designed to help the people who serve others, borrowers have reported challenges in successfully navigating the program.  In fact, as of December 31, 2019, 76 percent of processed applications were deemed ineligible due to not meeting program requirements, and another 22 percent for missing or incomplete information.

To support our employees through this complex process, we recently worked with our retirement and financial wellness provider, along with a social impact technology startup, to implement a new student debt solution. This solution helps our employees understand their options, as well as navigate the complexity of PSLF and Income-Driven Repayment Plans.

This approach has yielded meaningful results.  For example, our eligible employees have cut their monthly payments in half and are saving an average of $1,800 a year in student debt payment. In addition, those who signed up for the service are expected to see an average projected forgiveness of more than $65,000. These substantial savings have allowed our employees to redeploy hard earned dollars into other personal and family financial goals.

We also know that student loan debt is a heavy burden that takes its toll on the mental and physical health of employees. According to a year-long study by TIAA and the MIT AgeLab, 84% of American adults who are currently making student loan payments report a negative impact on the amount they are able to save for retirement.  In addition, borrowers with higher initial loan amounts report greater loan-related delays to traditional milestones such as saving for retirement, starting a family, or purchasing a home.

All of us, including policymakers, employers, tech startups, benefits managers and retirement providers play an important role in identifying and creating solutions to help individuals manage student loan debt.  We are in a position to meaningfully support the improvement of overall employee financial wellbeing and longer term financial security for both current and prospective employees.  After all, education is one of the smartest investments one can make – the return can be even smarter.

Lisa Kelly-Croswell is SVP and CHRO at Boston Medical Center, which worked with retirement and financial wellness provider TIAA along with social impact technology startup Savi to implement a new student debt solution.