Student Loan Debt: A Fundamental Component of Workplace Financial Literacy

Jul 31, 2022

The Class of 2022 has graduated into an economic reality with some uncertainty that can be daunting: a robust rate of inflation, the possibility of a recession, climate change that impacts all aspects of their lives whether they realize it or not, and social and political instability at home and abroad.

The stakes could not be higher than they are for your junior employees who are entering the workforce with student-loan debt and at the same time being offered retirement savings plans that can seem too complex to some.


Understanding the Current Landscape of Student Debt

Before you tackle the retirement savings topic with junior workers and new hires, it’s a good idea to understand the breadth and depth of their debt. As of April 2022, student-loan borrowers in the United States collectively owed nearly $1.75 trillion in federal and private student-loan debt, according to the Federal Reserve Bank of St. Louis1. On average, households with student-loan debt owe nearly $58,000, while the typical graduate student-loan debt is $71,0002. The 2021 U.S. Census showed 43 million Americans, or one in eight, carry student-loan debt3 while the high-school Class of 2022 in particular can expect to borrow approximately $40,000 to fund post-secondary school education.4


The figures are as high as they are in part because the cost of education is so high, and less people have the cash to pay for it. And the CARES Act, the stimulus legislation that suspended payment requirements on federal student loans from March of 2020 through August 2022, can be confusing. Many borrowers are not aware that payment requirements will soon resume. As a result, not only are many young workers with loans unaware of the extent of their debt and how it might impact their financial futures, they also could benefit from a plan to address it. 

You can’t ignore it, not pay it, and hope it goes away.
Richard Cimino
Executive Director of Education Financing | Morgan Stanley at Work on his observations of the behavior of student loan recipients

Explaining the Basics to Employees

You can use this knowledge gap as an opportunity to provide student-debt education as a component of financial wellness, essentially financial literacy for Millennials (Generation Y) and GenZ.


First, there are fundamental facts employees with debt should know—and which you can help to provide as educational tips: 


  • How much is owed?
  • What are the terms of the promissory note (pay-off date and interest rate)?
  • Is the loan federal or privately funded (U.S. government or Citizens Bank, SoFi)?
  • Who are the players (the lender who makes the loan, the servicer who collects payments—generally, they are not the same entity)?
  • What is the payment history to date on the loan?
  • What’s the credit profile of the borrower?

A Segue to Saving for Retirement

Once student-loan debt becomes more manageable, you can get to work on engaging junior employees in retirement plans. To these aspiring corner-office-holders, life after retirement can seem far away or hard to imagine. Yet with the fluctuations in market performance that are inevitable in one’s lifetime, it is possible that without retirement savings, today’s young workers will have difficulty maintaining a comfortable lifestyle.5


You can inspire young hires with a variety of strategies:6

  1. Discuss more than one retirement savings vehicle, both in the workplace and outside of the office—401(k)s, IRAs, profit-sharing plans.

  2. Model real-life savings scenarios—when to retire, how much to put away, what’s your household/relationship status, etc.

  3. Demonstrate how to develop a realistic budget that accounts for inflation over the long term—how much will a refrigerator or a car cost at age 72 versus 25.

  4. Encourage connection to one’s older self—live role-playing and age-morphing technology can help us develop empathy for our inner retiree and thus take actions that adequately provide for them in their golden years.

  5. Motivate with investment options that align with core beliefs and personal values—a worker who’s concerned about the environment is more likely to invest their retirement money into companies that produce clean energy or improve waste processing.

An Investment in Their Future

When you tune in not only to the circumstances but also to the sensibility of each age bracket, you can begin to change the mindset of new investors who do not yet feel confident investing in the future. For example, Government Executive found that seven in ten Millennials have expressed that they are deeply concerned about the environmental, social, and ethical impacts of the businesses they are investing in.7 According to Benefit News, GenZ is less financially literate than previous generations but more interested in learning about money.8 In other words, together, Millennials and GenZ bring to the workplace a complex set of attributes: a thirst for knowledge, an ambitious learning agenda, expectations for guidance, and a proclivity for conscientious investments. 


By providing student-loan literacy and retirement preparation to college graduates, either via workshops or onboarding financial advisors, you can help to equip employees to advocate for themselves—when investing, budgeting daily expenses, setting goals, or planning for later. Ultimately, financial literacy for Generation Z, Millennials—and others—means these valued employees can be more prepared to partake in financial workplace benefits and build the assets that can help give them a better chance of being able to afford a comfortable standard of living in the future. 


Learn more about how Morgan Stanley at Work can help you develop a literacy strategy for Millennials and GenZ who hold student loan debt.