For years, student loans were paused. Conversations around them went quiet. But now that repayments resumed — and student loan collections are restarting — the financial impact of student loans is hitting employees and their employers hard. Not only have shifting policies left more than 43 million Americans who owe over $1.6 trillion in student debt confused about how to navigate significant student loan changes that could impact their financial lives, but nearly 10 million borrowers are in default or at risk of default, which can also have a direct impact on employers.
The unseen business risk of student loan default
The U.S. Department of Education has announced that collections will resume May 5, 2025, which may lead to garnishment of up to 15% of an employee’s wages. Not only could this send the 70% of employees who are already living paycheck to paycheck into severe financial distress if they’re impacted, wage garnishments are a problem employers have to manage. They introduce:
- Time-consuming payroll adjustments
- Legal risk from processing errors
- Morale issues as employees deal with reduced take-home pay
- Higher turnover as financially stressed workers seek relief elsewhere
Some employers offer a student loan benefit point solution, but because most of these don’t consider the borrower’s holistic financial situation, they’re missing critical information that’s required to help employees make choices that support their best financial interests.
For example, if the employee has high-interest credit card debt and loans, and is struggling to keep up with rent, childcare, and everyday needs, the optimal student loan repayment path for that borrower looks very different from that for a financially healthy employee.
Likewise, there may be opportunities to alleviate the employees’ surrounding financial struggles by helping them manage debt, save money on interest, and potentially secure free resources to offset the costs of housing, childcare, or utilities. A student loan point solution won’t offer that type of assistance; it’s not meant to and is not incentivized to.
Brightside Financial Care doesn’t treat student loan stress in isolation. Instead, each Brightside user is paired with a dedicated Brightside Financial Assistant who helps them find solutions and understand options based on their full financial picture, including student loan support to:
- Navigate forgiveness and income-driven repayment options
- Apply for loan rehabilitation if they’ve already defaulted
- Identify wage garnishment risks before they impact paychecks
How Brightside helped Marvin navigate student loans
Marvin was struggling to make his $500 student loan payment each month while living paycheck to paycheck. Once a few money emergencies set him back financially, he worried he couldn’t keep up his student loan payments much longer. He’d applied several times to different programs that would lower or pause his payments, but was continually denied.
His Brightside Financial Assistant helped Marvin discover that he qualified for a student loan repayment plan that reduced his monthly student loan payment amount from $500 to $0. With that burden lifted, Marvin meets regularly to work with his Brighside Financial Assistant to build his credit score and an emergency savings account.
Student loan distress doesn’t have to disrupt your workforce
Financial stress is the root cause of lost productivity, absenteeism, and higher healthcare costs, and recent changes in student loan policies are impacting your employees’ financial lives. When you offer a benefit they can trust for personalized and comprehensive support and real solutions that address student loans as well as other financial needs, including hardship, they’re empowered to show up as their best selves at work, and you’ll see it reflected in their job performance.
Click here to learn more about how you can help turn student loan debt from a threat into an opportunity for your people and your bottom line.
