Student loan repayments could decrease employee financial wellbeing
February 12, 2025
Source: EducationData.org
There are a total of $1.77 trillion in outstanding student loans in the U.S. owed by about 43 million borrowers. Federal student loans comprise over 90% of this debt and the average federal student loan debt balance is over $38,000. This is not just a burden for recent graduates, since almost half of all student loan debt (46%) is held by borrowers aged 40 and older.
Many student loan repayments were on hold for the pandemic, and remained on hold as Biden Administration forgiveness programs were challenged in court. While some student loans were ultimately forgiven, those not forgiven required monthly payments to resume in September 2024 to avoid delinquency penalties. Federal wage garnishment will take effect for those who remain delinquent as of June, 2025. The Consumer Financial Protection Bureau estimates that about half (47%) of student loan borrowers entering repayment for the first time were not actively repaying loans as of the end of 2024. Many have limited room in their budgets for repayment, which averages over $400 per month.
Congress is considering the bipartisan Employer Participation Repayment Act (HR9164/S4778), which would permanently maintain tax-free status of employer student loan contributions. Otherwise, such contributions would be taxed starting January 1, 2026.
Implications for employers:
Wage garnishment is often associated with employee turnover - which could lead to additional talent challenges at some companies
Financial insecurity can lead to decreased productivity, a decline in mental health and an increase in other medical expenses.
Student loan payments can be a significant barrier to long-term savings, potentially delaying employees’ ability to retire
Employers can evaluate ways to support employees with student loan debt as part of their overall talent strategy. Options include subsidies, federal repayment programs navigation assistance, and programs that allow employees to direct benefit dollars to student loan repayment.
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