After a multi-year long pause on student loan payments and interest, student loan payments are due again beginning on October 1st, 2023, as the Department of Education’s COVID-19 relief ends. This transition marks a significant financial change for millions of Americans, including both young graduates and those from older generations who have been shouldering student debt for years.

Eligible loans had their payments and interest paused from March 13, 2020, until now. Student loans are not exclusive to a single generation; they affect a broad spectrum of individuals. While millennials hold a significant share of outstanding loans, Gen X and even some baby boomers continue to repay their educational debt. There is $1.75 trillion in student loan debt in the United States, with the average federal loan amounting to $35,210.

Here’s how the restarting of payments will affect employees:

• Financial Strain: For employees who have been accustomed to the payment hiatus, resuming monthly loan payments can be financially challenging. The sudden return of this financial obligation can impact their income and budgeting. With an uncertain economy, this can add even more stress to those with debt.
• Accrued Interest: During the pause, interest on federal student loans was temporarily set at 0%. However, this will now no longer be the case. Employees may need to deal with accrued interest on their outstanding loans, potentially adding to their repayment burden.

The financial stress brought on by student loan payments can spill over into the workplace, affecting employees’ job performance, well-being, and overall job satisfaction. Employers need to be aware of these potential consequences and consider taking steps to support their staff:

• Reduced Productivity: Financial stress can lead to reduced productivity, absenteeism, and distraction at work. Employees worried about their student loan payments may find it challenging to concentrate on their tasks.
• Mental Health: The financial burden of student loans can take a toll on employees’ mental health. Employers should provide resources and support for mental well-being, such as employee assistance programs and counseling services.
• Job Security: Some employees may seek new job opportunities with better compensation or benefits to ease their financial situation. High turnover can be costly for employers. Offering student loan repayment assistance can be an attractive retention strategy.

Employers can play a pivotal role in alleviating the impact of student loan payments on their workforce. Here are some strategies to consider:

• Student Loan Repayment Assistance: PlanSource’s Partner Marketplace features a student loan category, with solutions to help employees with repaying their loans. Adding these benefits to your benefits package is an easy way to instantly relieve the burden of loans on your employees.
• Financial Education Benefits: With the addition of student loan payments into household budgets, employees may need help balancing their finances. The Partner Marketplace offers several Financial Education benefits, allowing your employees to explore financial possibilities and plan for the present and the future.
• Financial Wellness Benefits: Offering Financial Wellness benefits, found in the PlanSource Partner Marketplace, can also be extremely valuable to employees. No matter where employees are with their finances, offering tools and resources that can help employees make and stick to a budget, get out of debt, save for retirement and future can help build financial confidence.
• Mental Health Support: Promote mental health awareness and offer resources for employees struggling with stress related to student loans. The PlanSource Partner Marketplace includes many benefits to help with mental health. This can include access to counseling services and stress management programs.
• Paid Time Off Exchange: The PlanSource Partner Marketplace offers a unique, one-of-a-kind benefit, time off perks. This allows employees to exchange their PTO for student loan assistance, among other exchange benefits.

As student loan payments resume after a prolonged pause, the impact on employees and employers cannot be understated. It is essential for both parties to recognize the challenges and explore avenues for support and assistance. Employers who take proactive steps to alleviate the financial burden of student loans on their workforce can contribute to a more productive, satisfied, and loyal team, ultimately benefiting their organization as a whole. Talk to an advisor today to see how enhancing your benefits package with solutions from the PlanSource Partner Marketplace can ease the student loan worries of your organization and your employees.