FINANCIAL WELLNESS

One in three employees may struggle with student loan debt

Thirty percent of all adults said they incurred at least some debt for their education.1 In fact, Americans hold $1.7 trillion in student loans, with an average balance of $28,950.2 There is also an outstanding $136 billion in parent PLUS loans (loans available to parents of college students), with an average balance of $16,452.2

High debt can take a toll on employees’ financial wellness as they struggle to balance financial priorities. For example, it can affect an employee’s ability to adequately prepare for retirement, as the goal to contribute to a retirement plan competes with the need to pay down debt, which could take an average of 17 to 20 years.3 Repayment could take even longer for borrowers earning lower incomes, such as women and people of color who hold two‑thirds of student debt.3

32%

of women in the workplace say they believe debt affects their ability to achieve their goals

Bank of America 2021 Workplace Benefits Report.

While student loan payments were paused in response to the pandemic, temporarily bolstering financial well-being,1 payments are now set to resume in January 2022. This could potentially trigger an increase in financial stress for employees with student loans, which can affect their mental health as well as their job performance. It’s important for employers to recognize when employees are struggling and offer support to help them manage their financial and overall wellness. The following sections highlight programs and resources that can help you provide your employees with assistance and support.

Explore programs that facilitate student loan relief

The Consolidated Appropriations Act, signed into law in December 2020, extends some COVID relief provisions for five years, including several provisions to assist employees currently struggling with student debt. For example, plan sponsors can use tuition reimbursement budgets to provide an employee benefit that helps pay down student debt. Through 2025, employers can make contributions of up to $5,250 per employee annually toward eligible education expenses, like tuition or student loan assistance, without raising the employee's gross taxable income.

4 in 10 employers now offer support on emerging topics including paying down student loans

Bank of America 2021 Workplace Benefits Report.

Connect employees to helpful resources

We offer a range of educational resources and tools that can help your employees make informed decisions about paying for college and managing repayment of student loans, including:

  • The Better Money Habits website, which features educational articles, videos and tools to help plan and pay for college.
  • The Education Center on Benefits OnLine®, which also provides convenient access to a variety of educational resources on college planning and student loan management. We can also offer a seminar on college planning.
  • Solutions such as a 529 savings plan, a tax-advantaged account designed to help families put away money for future education expenses.

Looking ahead to 2022, we plan to expand the Financial Wellness Tracker experience to connect employees to relevant education and resources directly from their suggested action plan. Resources may include access to one-on-one guidance via email, chat or phone, or a personalized action plan specific to paying down student loans.

Future enhancements planned include a digital dashboard where employees would be able to aggregate their student loans in one place and access resources such as a federal repayment evaluation/recommendation tool and options for refinancing. This tool might also help facilitate the administration of loan repayments by supporting the ability for direct payments (dollars or converted paid time off) made to principal loan balances. And, while the industry awaits additional legislation, we are taking the necessary steps to provide the capability to offer student debt 401(k) matching contributions in the future. As we continue to build out these experiences, we’ll share more details.

1 Federal Reserve, Report on the Economic Well-Being of U.S. Households in 2020, May 2021.

2 Federal Student Aid, 2Q 2021.

3 401(k) Specialist Magazine, “Student Debt’s Devastating Impact on Retirement Saving: GRPAA Conference,” July 2021.

Any new products, services or enhancements are subject to change based solely on Bank of America.