The financial stress placed on employees during the pandemic impacted not only their bank accounts, but also impacted their physical and emotional well-being. With 2022 around the corner, an expert predicts that economic pressure will only worsen in the coming months.
Sixty-three percent of employees say their financial stress has increased since the start of the pandemic, according to data from PwC. A major source for many is student loan debt repayment, which, after a pandemic moratorium, will resume in late January.
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“The good thing about moratoria is that they give you a bit of a break,” says Dan Macklin, CEO of financial benefits provider Salary Finance. “But with these things taken away, human beings are generally not very good at budgeting and figuring out what that might mean to them two months from now.”
Macklin recently connected with Employee Benefits News to discuss his thoughts on the financial stress employees are currently undergoing and why he thinks it will only get worse in February.
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Is the end of the student loan forbearance period the reason you expect employee financial stress to escalate in February?
Yes. Forty million Americans have student debt, and the vast majority of them haven’t paid anything since April 2020. That was a good thing for most of those people who had that debt taken out for a while. long time, especially if they had. lost their job. But since it returns in February, these are monthly repayments of several hundred, if not thousands of dollars in most cases. So it’s an extremely important part of these people’s budgets and it’s going to come as a shock to a lot of people. Honestly, I don’t think most people know it’s going to come back or how to get by if they can afford it. Millions of people are just in the dark.
What Can Employers Do to Help Employees Cope with the Student Loan Burden?
Employers should be aware that their employees want help and advice on this matter. Many people with student debt don’t really know how it works. They don’t know what interest rate they’re paying, and some don’t even know who they’re debting to because student loan services change all the time. Employers therefore have an important role to play in helping their employees understand their situation.
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This doesn’t mean employers stick their noses in their noses and dictate that employees should do this and that employees should do that. It simply means helping employees eliminate all available information and providing them with real, reliable, truthful and factual information about their options. Student loans are only one category, but they relate more broadly to other areas of finance. Employers are certainly more and more eager to understand this and help their employees in this way.
What other areas of financial security do employees want to help manage?
Employers need to make sure people realize that borrowing money at ridiculously high interest rates is not a good thing. Most people understand this, so more importantly, it’s about giving employees a realistic alternative to prevent them from going to payday lenders who charge ridiculous amounts and then don’t report to the credit bureaus. . So an employee can pay off their payday loan at ridiculous effective rates, but when they need money next week or next month, their credit rating is still as bad as it was before and it is still the same. bad options.
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Employers understand that these options are not ideal for them or their employees in terms of productivity and performance. Employers understand that if they can come up with better alternatives that lower those interest rates, help improve credit scores and get people out of a financial mess, employees will appreciate the help.
What are some of these better alternatives?
Encourage each employee to have a savings account and put money into it, so that at least each employee has $ 400 or $ 500 in savings. Instead of just putting all the money from each pay period into what is normally a checking account, give employees the option and lightly encourage them to put 90% of their pay in a checking account and 10% in an account. separate savings. Having this discipline to put your money in two different places has turned out to be an amazing advantage like when their car breaks down because they have the money to do it and they don’t have to go down that aisle to find a loan. .
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Do you think employers have generally done a good job helping employees cope with financial stress?
Historically, I don’t think they’ve done a great job. In the past, the market norm was to pay a salary, provide a 401 (k) option, and provide health care. For a number of years, maybe decades, it was fine, but today’s employees need more than that and they demand more and more than that.
What do you think is the biggest lesson in employee financial stress coming out of 2021?
People don’t function as individuals – they have families behind them. So even for an employer who was lucky enough not to fire anyone or to have time off, their employees still felt financial stress because inevitably a spouse, child or parent was going through something. The trends we saw before the pandemic – the rising cost of caring for the elderly and children – those things were still there and the pandemic put extra weight on people’s shoulders. My main takeaway from 2021 is that people are so interconnected with their family members and often employers are quite blind to it.