Student Loans: Is it Time for Employers to Step In?

Transcription

1 Student Loans: Is it Time for Employers to Step In? Michael Doshier, Global Head of Retirement Marketing, Franklin Templeton Investments Cindy Silva, Head of Financial Wellness Strategy, Fidelity Investments Kate Winget, Chief Sales Officer, Gradifi Rachel Collins, Counsel, Congressman Rodney Davis Craig Copeland, Senior Research Associate, EBRI #ebripf83 #CollegeDebt 1

2 Trends in Student Loan Debt, Craig Copeland, EBRI EBRI Policy Forum May 10,

3 Student Loan Debt Overview Incidence Amounts Payments Specific Assets and Student Loan Debt Data Source Survey of Consumer Finances Federal Reserve s triennial survey on family wealth Most comprehensive government survey on American families total wealth Contains all types of wealth including detailed data on all asset and debt types Employee Benefit Research Institute

4 Percentage of Families With Student Loan Debt and Percentage With Student Loan Debt in Repayment Status, % 22.3% 20.0% 19.1% 19.9% 15.0% 10.0% 10.5% 11.6% 11.6% 13.0% 13.4% 8.6% 5.0% 5.8% 0.0% Total Repayment Source: Employee Benefit Research Institute estimates from the 1992, 2001, 2010, 2013, and 2016 Survey of Consumer Finances. Employee Benefit Research Institute

5 Percentage of Families With Student Loan Debt, by Age of Family Head, % 40.0% 40.0% 41.4% 44.8% 35.0% 34.3% 30.0% 25.0% 24.4% 26.0% 26.2% 28.7% 23.7% 20.0% 17.5% 18.4% 15.0% 10.0% 5.0% 0.0% 11.7% 11.9% 12.0% 12.9% 10.7% 9.3% 5.7% 5.2% 2.9% 2.7% 2.1% 2.4% 1.2% 0.4% < or Older Source: Employee Benefit Research Institute estimates from the 1992, 2001, 2010, 2013, and 2016 Survey of Consumer Finances. Employee Benefit Research Institute

6 Percentage of Families With Student Loan Debt, by Family Income Quartile, % 25.8% 24.0% 23.0% 22.9% 23.4% 22.0% 22.4% 20.0% 20.2% 21.6% 18.0% 16.9% 16.0% 15.6% 16.9% 17.4% 14.0% 12.0% 10.0% 8.0% 6.0% 13.1% 13.4% 15.0% 12.6% 12.6% 10.4% 9.5% 9.1% 7.7% Lowest Second Third Highest Source: Employee Benefit Research Institute estimates from the 1992, 2001, 2010, 2013, and 2016 Survey of Consumer Finances. Employee Benefit Research Institute

7 Student Loan Debt Amounts 7

8 Distribution of Student Loan Balances for Families Having Student Loans, by Various Demographic Categories, $80,000 $70,000 $66,318 $72,177 $80,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 $41,984 $41,500 $37,120 $32,054 $34,293 $30,016 $23,463 $23,024 $28,589 $17,529 $19,000 $18,706 $14,369 $11,731 $10,835 $11,751 $6,632 $8,300 $6,187 $5,363 $4,063 $2, th Percentile Median 75th Percentile 90th Percentile Average Source: Employee Benefit Research Institute estimates from the 1992, 2001, 2010, 2013, and 2016 Survey of Consumer Finances. All dollar values are in 2016 dollars. Employee Benefit Research Institute

9 Median Monthly Required Student Loan Debt Payments and Percentage of Income the Debt Payments Represent 9

10 Distribution of Reported Required Family Monthly Student Loan Debt Payments and Distribution of the Percentage of Family Income That the Debt Payments Represent, 2016 $ % Monthly Debt Payment Percentage of Income $ % 10.0% $ % $400 $ % $ % 6.0% $200 $ % 3.1% $200 $350 $ % 2.0% $100 $0 25th Percentile Median 75th Percentile 90th Percentile Average Source: Employee Benefit Research Institute estimates of the 2016 Survey of Consumer Finances. 0.0% Employee Benefit Research Institute

11 $250 Required Median Monthly Student Loan Debt Payments and Percentage of Income That the Debt Payments Represented, by Family Head Age, % 4.0% Median Monthly Payment Percentage of Family Income 4.0% $ % 2.9% 3.1% 3.5% 3.0% $ % $100 $200 $200 $200 $ % 2.0% 1.5% $50 $ % 0.5% $0 < or Older Source: Employee Benefit Research Institute estimates of the 2016 Survey of Consumer Finances. 0.0% Employee Benefit Research Institute

12 Specific Assets and Student Loan Debt Home Ownership DC Plans 12

13 Percentage of Families Who Own a Home and Have a Positive DC Balance, by Student Loan Incidence and Age of Family Head, % 70.0% With Student Loan Without Student Loan 65.8% 69.7% 60.0% 52.7% 50.0% 40.0% 30.0% 35.2% 31.5% 40.4% 28.6% 44.8% 20.0% 10.0% 0.0% Home Ownership Positive DC Balance Home Ownership Positive DC Balance Younger than Age 35 Ages Source: Employee Benefit Research Institute estimates from the 2016 Survey of Consumer Finances. Employee Benefit Research Institute

14 $500,000 Distribution of DC Plan Balances for Families With and Without Student Loans, Families With Heads of Specific Ages, 2016 $500,000 $450,000 $400,000 $410,000 $350,000 $300,000 $250,000 $227,000 $200,000 $150,000 $100,000 $50,000 $0 $148,100 $90,000 $80,000 $62,000 $46,000 $38,000 $16,000 $18,000 $24,000 $2,400 $3,000 $8,000 $11,000 25th Percentile Median 75th Percentile 90th Percentile Younger than Age 35 with Student Loan Age with Student Loan Younger than Age 35 without Student Loan Age without Student Loan Source: Employee Benefit Research Institute estimates from the 2016 Survey of Consumer Finances. Employee Benefit Research Institute

15 Percentage of Families With Heads Younger Than Age 35 and Having Some College That Own a Home and Have a Positive Defined Contribution Balance, by Student Loan Incidence, % 35% With Student Loan No Student Loan 36.3% 30% 25% 27.3% 26.5% 24.9% 20% 15% 10% 5% 0% Home Ownership Positive Defined Contribution Balance Source: Employee Benefit Research Institute estimates of the 2016 Survey of Consumer Finances. Employee Benefit Research Institute

16 $25,000 Distribution of Defined Contribution Balances for Families With Heads Ages Younger Than 35 and Some College, by Student Loan Incidence, 2016 With Student Loan No Student Loan $23,200 $21,490 $20,000 $15,000 $15,300 $16,667 $10,000 $10,000 $5,000 $1,600 $3,000 $4,700 $0 25th Percentile Median 75th Percentile Average Source: Employee Benefit Research Institute estimates of the 2016 Survey of Consumer Finances. Employee Benefit Research Institute

17 Takeaways The incidence of student loan debt has been growing significantly (nearly doubling since 2001), particularly among families with heads younger than age 35 and ages The average student loan debt amount increased in real amounts by 20% from 2010 to 2016, and the median increased 32%. The required median debt payment was $200 in 2016, which represented 3.1% of family income. However, these payments reach 10 percent and above of family income for those with the highest debt payments. DC balances are lower for those with student loan debt than for those without it. Employee Benefit Research Institute

18 th Street NW Washington, D.C Employee Benefit Research Institute

19 EBRI-ERF Policy Forum #83 Retirement, Health and Financial Wellbeing Thursday, May 10, 2018 Wireless Network: DCCTR Wireless Password: meeting2015dc Tweet: #ebripf83 Employee Benefit Research Institute

20 EBRI Policy Forum K AT E W I NG ET

21 Debt directly impacts your employees and their performance 80% of working professionals with student debt consider their student debt to be a source of significant or very significant stress. Four out of five employers report that their employee s personal financial issues impact their job performance resulting in: Which translates to real costs for employers: H o u r s a month are utilized by an estimated 80% of employees who try to deal with their financial worries at work % of millennials that like their job are still planning to leave in the next three years % Turnover costs up to % of an employee s annual salary $30.5B Millennial turnover alone is estimated to cost the U.S. economy $30.5 billion Corporate culture and benefits packages must be tailored to engage the needs of Millennials and give them reasons to stay

22 Debt is not a one size fits all problem, and our solutions shouldn t be either Budget: $7.500/employee Goal Target Plan Retention Attraction Diversity Competitive Talent Hire Millennials Mid-level management Master s preferred Women & Minorities High value employees with specialized training $100/month benefit 6 years $200/month benefit 3 years $100/month benefit Increase of $100/year 3 years One time hiring bonus of $7,200 after 1 year of employment

23