When it comes to fostering diversity, equity, and inclusion in the workplace, the most popular advice tends to focus on company culture and leadership (and for good reason–creating a psychologically safe space for your employees is key to creating cultures of inclusion).
But did you know that there’s one surprising thing employers can do to support diversity in the workplace in a meaningful way? Offer student loan repayments as a benefit.
While the student loan debt crisis affects people from all backgrounds, many people don’t realize that the crisis disproportionately impacts people of color. According to a 2016 report by the Consumer Financial Protection Bureau, more than 90% of African Americans and 72% of Latino students take out loans to attend college, compared to 66% of white students and 51% of Asian-Americans.
Additionally, borrowers from communities of color are likely to take on greater amounts of debt and are at higher risk of delinquency or default thanks to the pervasive racial wealth gap.
The Student Borrower Protection Center found that African Americans take on more debt for higher education regardless of the school type or sector (public, private or for-profit; two-year or four-year) and have the highest and fastest-growing loan balances of any ethnic group.
When it comes to default rates, zip codes with a black majority were 2x as likely to default (and zip codes with a Latino-majority, borrowers were 4% more likely to default) than borrowers in predominantly white areas.
What’s even more shocking is that while the typical white borrower pays down nearly 95% of their loans in the 20 years after starting college, the inverse is true for African Americans, who will still owe 95% of their original balance after the same period. Put another way, in the two decades following matriculation, the median black borrower will have only been able to pay off 5% of their outstanding student loan balance!
While the typical white borrower pays down nearly 95% of their loans in the 20 years after starting college, the inverse is true for African Americans, who will still owe 95% of their original balance after the same period.
There’s no denying that, as the total size of outstanding student debt balloons to $1.8T, the student debt crisis is a problem for everyone regardless of race or ethnicity. What’s also clear from the data though is that borrowers from communities of color often shoulder a larger financial burden because of student loans.
Offering an employer student loan repayment benefit can be a powerful way to support diversity, equity, and inclusion in your organization, especially given the outsized impact student loans have on borrowers from communities of color. Employers who adopt this benefit shouldn’t be surprised if they see high adoption rates among employees of color; After PWC created their student loan paydown program, they found that a higher percentage of eligible employees of color participated in their benefit program than eligible white or asian employees.
Although employer student loan repayments are a newer benefit, this early signal is promising, especially considering Blacks and Hispanics are less likely to participate in 401K plans relative to their White and Asian peers. If your company already has a 401k plan in place, an employer student loan repayment benefit could be the perfect complement to your benefits package.
With employer student loan repayments, you can show your people that you’re thoughtful about their individual circumstances and serious about offering benefits that can make a meaningful difference in their lives.
Highway Benefits would love to help. To learn more, talk to a member of our team today.
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