The College Debt Triangle

student loan debt

A million in college debt. That's the plight an orthodontist chronicled in the Wall Street Journal. Specifically $1,060,945.42. It makes the current average of $37,000 look pretty darned reasonable. While we can all breathe a sigh of relief that only a few folks are in the seven-figure club (about 100 out of the 40-million with debt), we should remember that if financial circumstances are dire enough, four or five figures might as well be seven.

The Real College Debt Problem

The Brookings Institute says the vast majority of defaults are among people with $10,000 in college debt -- meaning you don't need to owe a million to be in tough shape. That's why student loan repayment isn't a standalone benefit. It's easy to think employer loan contributions are enough (and let's be real: cutting a few years off employees' debt is huge). But it's not worth as much as it could be if you were to also help your employees effectively manage the rest. If the same people you're helping are either floundering on paying their remaining balance or racking up more education debt for themselves or a child, your contribution is going to fall on empty bank accounts. The most effective benefits address the other two sides of the debt triangle:

How to get out of debt

Student debt is notoriously complicated to unravel, as evidenced by the number of MIT employees who showed up for the launch of their school's student-loan-counseling. "They came in with envelopes of student loans that had never been opened," MIT's Work/Life Center Senior Manager Ronnie Mae Weiss told us. "Piles of them seriously." Many people would rather ignore debt (and so let it balloon) than face the hard facts. So pointers -- on how to lower payments if that's an issue, and why to stop and think before refinancing federal loans privately -- can double the value of your repayments.

How people got into debt

We don't talk enough (as in, at all) in this country about the front-side of college debt -- aka how to avoid it in the first place. Unlike any other investment such as homes or cars, we're all trained to pick the high-end brand name first and figure out how to pay for it later. And there are limited governing entities: people are free to cobble together as many loans as they choose. That leads to 18 year olds borrowing boatloads; and parents risking  nest eggs. Hence five, six, and seven figures in loans. Advising people on the application side -- guiding them to shop for value versus brand name -- could generate decades in returns.

The takeaway? Think of financial wellness benefits as a booster for your student debt repayment program. With it, your contribution gets your employees closer to the finish line. Without it, some of them might just as well have $1 million in debt.

Employees smiling in meeting

Implementing Student Loan Repayment Benefits

Learn the best practices for creating a high-impact student loan benefit for your organization.

Written by: Alan Robins

May 15, 2021

About the Author

Alan Robins at Bright Horizons

As Director of Product Marketing, Alan drives original research and thought leadership for Bright Horizons education benefits programs, drawing on his extensive experience helping companies optimize education programs to support their Talent and HR objectives. Prior to Bright Horizons, Alan was at Gartner, a global leader in providing advisory services to technology and business executives, where he led new product teams in Europe and the US.