Student loan debt is crushing employees’ mental and financial wellness
When Tina Walker decided to invest in her education and gain several advanced degrees, she knew she was going to make a decision that would cost her. To finance her further education, 52-year-old Walker took out several student loans in the early 2010s – and she knows it will take her more years to repay the nearly $ 160,000 than for her PhD.
Today Walker is vice president of human resources at the California Community Foundation, a nonprofit that supports and nurtures communities in the Los Angeles area. Walker received her PhD in Organizational Leadership in October 2017, and just three months after graduating, the Department of Education knocked on the door. It was time to pay.
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“Sometimes the decision to pursue higher academic goals can be very daunting,” says Walker. “It’s not that much. Can I do it, but can I afford it? There is nothing more daunting than not being able to really celebrate that achievement because now you have all of these additional entanglements. “
Walker is not an outlier. Outstanding U.S. student loan debt hit a staggering $ 1.7 trillion in late 2020, according to the Federal Reserve, and there’s no sign of that rising debt slowing. Sixty-five percent of college-educated adults have a student loan debt averaging $ 39,351, according to First Republic Bank.
This stress can negatively impact a person’s mental health and affect their ability to work at work or reach and celebrate important life events – not to mention the strain on their finances and ability to comfortably retire to step. Walker admits she had many sleepless nights worrying about her student loan debt.
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“That’s not how often we think of financial stress in mental health, but there are indeed strong links between financial stress and mental health,” said Myra Altman, psychologist and vice president of clinical care at Modern Health. And together, the two of them can create an endless cycle of worry and stress. “Financial stressors affect your mental health, and there’s an interesting relationship going in the opposite direction: when you’re struggling with mental health problems, it becomes more difficult to manage finances.”
The financial burden of debt
Financial insecurity can have a variety of negative mental health effects, including an abundance of shame and guilt, Altman says. And these feelings can often prevent a person from seeking help.
“When you’re financially more unstable, I’ve seen feelings of shame and insecurity very often,” says Altman. “I should have done it differently, I made a mistake. This shame is very common, especially when it comes to student loan debt or retirement. There is a lot of self-blame and a lot of anger about the systemic structures that put them in these positions as well. “
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Finance has always been a taboo subject in the workplace, and it’s not uncommon for some companies to forbid employees from discussing their salaries with one another. However, employers have the option to change the stigma around money and mental health discussions and offer employees education, coaching, and benefits that can help minimize financial burdens and care costs – another prohibitive factor when looking for help.
“Getting care is very expensive, whether it’s psychiatric care or financial assistance, and more and more employees are seeing this as an important part of the package,” says Altman. “The more employers can do to provide this type of care to their employees cheaply and free of charge, the more stress that can be relieved and some of the barriers that they really need to focus on can be removed [self-care]. ”
Employers have a responsibility to help
It is important for employers to recognize when workers are having problems and to provide support and resources to help them improve their financial well-being and overall mental health. The two are inextricably linked, and employers cannot expect their employees to put their full selves to work and be productive when struggling to pay rent or buy groceries.
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Walker knows this all too well, and now that she holds a leadership role within the California Community Foundation, she is working to create better support for team members who may be struggling.
“My job is to monitor all things that have to do with people,” says Walker. “I am in a very important place because I personally traveled this trip.”
Because of this, she asked CCF executives to work with Goodly, a student loan service provider that enables employers to make direct payments on their employees’ loans.
“It was easy for me to introduce this option to CCF and I was very excited when our management and leadership teams said yes,” says Walker. “And they said yes at one of the higher contribution levels that they were willing to contribute for the employees.”
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Providing student loan assistance is a breeze for businesses, says Greg Poulin, CEO of Goodly. Such advantages can reduce employee turnover, reduce absenteeism, improve productivity and thus have a positive effect on company results.
On a human level, such benefits give people their lives back so they can make plans for the future.
“You can’t put your life on hold, you can’t say I will suffer today and enjoy it later,” said Scott Thompson, CEO of Tuition.io student loan provider, who helps employers contribute to employee loans. “We run into it a lot.”
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Trilogy Health, a long-term caregiver, offers its employees the benefit of Tuition.io. The employer saw how this debt affected its employees financially and mentally, and how well they did their job. As employees began to take advantage, Trilogy Health retention increased and employees became happier, says Todd Schmiedeler, chief Engagement and Innovations Officer.
“We heard stories from employees [saying] “Student loan debt is keeping me from buying a house,” and “I don’t feel comfortable asking my girlfriend to marry me because I have all this student loan debt,” says Schmiedeler. “That’s the thing about student loans, we don’t think about it that way, we tend to think it’s just a money thing. But it is not. It’s a matter of hope. “
Effects on Retirement
When working with a new employer to offer Tuition.io benefits, Thompson will first ask them about their level of participation in the company’s retirement plan – and it’s not uncommon for employers to express frustration on this question. Due to the higher debt of student loans, employees often skip retirement planning to make ends meet.
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“People who are able to control in the short term are much more willing to invest in the long term,” said Jeff Cimini, senior vice president of retirement product management at Voya Financial.
Voya works with a company called Vault to provide services to plan sponsors who have their retirement plan with Voya. Through Vault, employees can access advisory and other financial support services to prepare for a safe today and a safe retirement.
“With this help and this help, we find that people are feeling a lot more comfortable,” says Cimini. “We are seeing higher productivity at work, but we are also finding that this also has a positive effect on retirement behavior.”
96 percent of those with student loan debt would likely or very likely save more for retirement if they felt they had their student debt under control, according to a study by Voya. In addition, seven out of ten employees agree that they need their employer’s help in order to be healthy and financially secure, while six out of ten employees say it is their employer’s responsibility to extend this assistance.
“What we saw last year with COVID and these high unemployment rates was that a lot of people hadn’t put any emergency savings funds aside and therefore really weren’t that financially secure, but were highly dependent on their work for every day. today, ”says Cimini. “When [their work] was either temporarily or permanently paused, the only backdrop [employees] believed they had their retirement account. We have seen a significant increase in hardship cases. “
There is a misconception among student loan borrowers that they must first pay off their debts and then consider retirement, but as Walker testifies, this is not how life works. When the Department of Education came to collect her payments, Walker juggled care costs for her recently deceased grandmother, the cost of raising her son, and daily bills.
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“You are starting to make very conscious decisions about your funding and your expenses because you have to keep every dollar counting,” says Walker. “You don’t go on lavish trips, you learn to enjoy a stay, you learn to find beauty in a trip to the beach or a trip to the park.”
But these sacrifices do not always reap rewards. Walker, who prioritized saving for retirement when she was in school, is now looking at student loans large enough to keep the workforce for longer periods of time. She looks forward to retiring, probably at the age of 72, with some confidence and security – though the tuition fees may have helped her find an easier way forward.
“What I’ve done over time is adjust my contributions to my financial needs,” says Walker. “I haven’t always met my contribution target and now that I have loan repayment I haven’t put as much into my retirement plan, but I’m still contributing. Retirement is not something you want to catch up with. “