Student loan repayments are back and they’re affecting employee retention
Employees who consider their student loan debt to be a “heavy burden” are 2.4 times more likely to be in the process of leaving their organization.
After a nearly three and a half year pause, student loan repayments are back and they’re not only affecting workers, but employers too. According to the Federal Reserve Bank of New York, the pause on loan repayments afforded 28 million borrowers more than $260 billion in waived payments. Now, the millions of Americans faced with college debt must find a way to repay their loans once again.
New data released by ADP Research Institute found that the resumption of student loan payments will likely affect employee retention. Even though one might expect that employees with a higher burden of loans would plan to stay at their current job, ADP researchers found it’s actually the opposite. Workers with greater amounts of debt are more likely to leave their jobs.
“Employees who consider their student loan debt to be a “heavy burden” are 2.4 times more likely to be in the process of leaving their organization,” according to ADP. Perception of debt plays an important role too. Employees who perceive their debt to be a greater burden – whether it is or not – are even more likely to be searching for a new role.
The study found that workers with $150,000 or more in student debt are 3.4 times more likely to feel burdened than those with smaller outstanding loans. Loan repayments are pervasive and will affect workers of every age. According to the study, employees of every age group have seen an increase in loan balances over the last three years.
Yet ADP researchers found something even more concerning. Workers faced with debt repayments plan to reduce other spending by only $56 per month. This will result in a $1.6 billion decline in monthly U.S. personal spending, even though loan repayments totaled about $6 billion a month prior to the pandemic, according to the Fed.
So where will the money come from?
Based on their research, ADP predicts that workers might be hoping to land higher-paying jobs in the coming months, which could trigger a labor-market shift as workers begin to search for better opportunities.
Related: Student loan payments are resuming: It’s time to roll out financial wellness benefits
The study recommends that employers who are looking to increase employee retention should consider offering financial education and resources to help with budgeting, debt management and the basics of credit and interest to alleviate stress.
Additionally, ADP recommends that employers take advantage of the federal Secure Act 2.0, which will allow employers to make matching contributions to 401(k)s and other plans based on an employee’s student loans, even if the employee doesn’t make contributions themselves, starting in January 2024.