Student Loan Debt and Employer Assistance
WASHINGTON, D.C. – On August 16, 2017, the Consumer Financial Protection Bureau (CFPB) released a report analyzing that almost half of student loan borrowers leave school with over $20,000 in student debt. This current trend is making more employers offer student loan repayment benefits to their employees. CFPB compiled a report that gives employers suggestions to maximize the value of those benefits.
In our country, there are 44 million Americans that are indebted with student loans. They obtain these loans from either the federal government or private lending companies or banks. These loans accumulate to over $1.4 trillion, in which the majority come from federal loans. Loan lending services are a crucial department in communicating between themselves and the borrowers to process payments and managing their outstanding accounts.
Borrowers Unable to Repay Loans
CFPB conducted a formal study on an experimental group of student borrowers’ credit reports. The analysis shows the following:
- Over 40 percent of student loan borrowers owe $20,000 after leaving school. This fraction is more than doubled compared to figures from the beginning of the last decade. Over 16 percent, of the same group borrowers, owe $50,000 after leaving school. This figure has more than tripled compared to the previous decade.
- Student loan borrowers over the age of 34 represent half of those who only start repayment. The figure has doubled since the past decade.
- The amount of borrowers who are not paying their loan balance has increased from 16 percent in 2008 to 30 percent in 2016. This mean that the interest they are paying is not decreasing, and thus the principal stays the same for every payment period.
Employee Student Loan Repayment Benefits
With student loan debt being an issue on a grand scale, employers are looking at ways to assist manage the debt. Employer contributions can be used to prepay principal. In a lot of cases, loans come from different sources with different time and percentage terms. So employers have to outsource to third parties in order for them to organize loan repayments. Furthermore, CFPB conducted a more detailed analysis about employers’ activities in a report. Some underscored points are as follows.:
- Employers offer more employee assistance with student loan debts. Many companies recognize that financial problems can negatively impact employers’ lives. More employers are beginning to offer repayment assistance programs through third-parties.
- With employer assistance, the borrower can save thousands of dollars of interest in interest payments over the life of the loan.
Both of the mentioned reports can be found on the official CFPB website.