Americans are currently saddled with $1.5 trillion dollars of student debt. $1.5 trillion dollars. This is no longer a personalized problem, only affecting a few people here and there. It’s a crisis. The good news? Debt relief programs, including employer-issued benefits, are cropping up. But before we can look at those, it’s important to understand the current scene and how we got here.
Here’s the deal. Tuition and fees at public and private colleges and universities rose at about three times the rate of inflation between 2007 and 2018.
And when you look at current costs compared to those incurred by students in 1988, you’ll see that, taking into account inflation, these costs are about three times as high as they were 30 years ago.
Even in the face of these mounting costs, students and families still see college as a good investment. They sign on the dotted line for loans that will likely end up burdening them for years and years to come because they believe higher education will change their lives for the better.
Unfortunately, these students chasing their career dreams are often punished for seeking financial help. Seth Frotman, former student loan ombudsman at the federal Consumer Financial Protection Bureau and current executive director of the Student Borrower Protection Center, explained it this way:
“In this country, we essentially treat student loan borrowers the same way we treat tax cheats (…) We will seize your wages. We will seize your tax refunds. We’ll even seize your Social Security benefits. We don’t allow them to have a second chance in bankruptcy all because you have a student loan. That is wrong.”
Something’s got to change.
Some current solutions are proving to be less effective than desired. Take the Temporary Expanded Public Service Loan Forgiveness Program (TEPSLF). This program was funded by Congress in 2018 to help public servants (like teachers and police officers) access loan forgiveness resources and was afforded a budget of $700 million dollars across two years.
However, of the nearly 40,000 applicants, as of April of 2019 only 262 people have actually received debt relief. That’s a whopping 0.006% success rate. Many blame a complicated application process and confusing requirements. Clearly, this solution is not working.
A report issued June 14, 2019 by the U.S. Department of the Treasury included recommendations for improving the current student loan situation. The authors of the report call on colleges and universities to be more transparent about tuition, fees, and cost of living in acceptance letters. They also recommend financial literacy courses for students. While changes like this might help, what about people who are already weighed down by student loans? How can we address existing issues?
Employer benefits and fintech integrations: Promising options
More and more employers are adding a new option to their suite of benefits: employer-assisted student loan repayment. Think of it like retirement savings. Employees pay their monthly loan bills, employers kick in a matching percentage. The debt gets paid off faster so employees can move on with their lives and shed the weight of endless bills. Companies like Vault give HR departments the platform they need to connect employee loan accounts with employer payments. No roadblocks.
Finicity is proud to power some of these solutions with our data access and insights products. This problem isn’t going to go away on its own and complicated debt forgiveness programs aren’t helping. This 21st century crisis needs 21st century solutions. Simple. Hassle-free. Effective.