Three-pronged Strategy to Resolve the Student Loan Debt Crisis in America | Edcor

Three-pronged Strategy to Resolve the Student Loan Debt Crisis in America


According to current statistics, the U.S. student loan debt stands at a staggering 1.75 trillion dollars from 45 million borrowers. The federal loan portfolio totals over 1.59 trillion, with 42.9 million Americans owing $37,105 on average. Women owe two-thirds or 58% of the total student debt. Black or African American college graduates owe $25,000 more than their White counterparts in student loan debts. On average, it takes women 2 years longer to pay off their student loan debts even though they make continuous payments.

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The American government continues to provide relief and aids towards the crisis. More than 35 million of these borrowers received relief under the Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020. There has been a further extension to the pause on student loan repayment till May 1, 2022. Nonetheless, the student loan debt has grown 6 times faster than the American economy. Even after millions of federal loans have received zero growth in interest during the pandemic the total student loan debt increased by more than half a million monthly through the year 2021.

Borrower prudence and Government reliefs alone are insufficient to solve the crisis. Corporate America needs to pitch in too and shoulder some of the burdens because employees are ultimately getting higher education to accomplish both organizational and personal goals.  With all the three working together, we would expect to see considerable change.

Here’s some guidance on how this benefit helps employees and employers, and ways in which it can be implemented:

  1. Company contributions towards employee student loans help shave off years in repayments and save interest dollars for the beneficiaries.
  2. Usually, the contributions are capped to a lifetime maximum and there’s a before and after employment length clause for eligibility. As a result, the benefit serves as both an effective talent recruitment and retention strategy.
  3. It’s an important cog in the Diversity, Equity, and Inclusion (DEI) strategy.
  4. Companies can choose to offer this to a very specific group of employees for DEI, recruitment and retention purposes, or they can offer it widely. The benefit has infinite possibilities in its design because it is not heavily regulated except around taxation. Edcor can help companies can break the mold and be as creative as needed to fill the gaps and to provide true value for employees.
  5. The most common type of company contribution towards an employee’s Student Loan Debt is through a monthly cash input over and above the employee’s existing payment towards the loan. Most companies start with $100 per month and have a benefit upper limit or a fixed term. Many hospital systems and large healthcare systems were early adopters of this benefit as they fight for talent. Some of Edcor’s Clients contribute $100 – $500 a month, or a one-time payment of up to $10,000 or more.
  6. The second common type is cash contributions equivalent to the employee’s payment towards the Student Loan Debt. There is an upward maximum of this contribution. However, the employee needs to make extra payments than their monthly minimum to get the maximum benefit of such programs. Some employees choose their bonus or sign-on bonus to be paid directly to their loan holder, often after 90 days or 6 months of service. This amount is usually up to the $5250 tax limit, but in some cases, it could be up to $10,000 or more.
  7. Most companies include these contributions as a part of fringe benefits via third-party Specialized HR benefits providers who offer Student Loan Repayment assistance services.
  8. The services are broadly categorized under Repayment assistance, Refinancing or Financial planning, and Counselling resources for Client employees.
  9. Edcor’s unique offering to Clients includes:
  • flexible and customized solutions,
  • advising for HR policy writing tied to upskilling and retention goals, and
  • linking of the employee’s student loan repayments and tuition assistance to the CARES Act for benefit maximization.

The PwC Financial Wellness Survey of 2021 showed that 72% of incumbents would be attracted to a new company that cared more about their financial wellbeing, and 45% indicated that financial worries were a cause of distraction at work. Offering this benefit substantially dissipates the financial worries for employees and enhances their wellbeing, which eventually leads to better productivity at work. The overwhelming data on Student debts, the importance of employee financial wellness, and the ongoing worker shortage are compelling reasons for CHROs to include Student Loan Assistance as a benefit not just to attract and retain talent, but also to level the playing field for their diverse workforce.

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