The Burden Of Debt

Measuring The Impact Of Student-Debt on the Retirement-Savings Process

Even in normal times, it can undermine personal financial planning

By John Kozar and Doug Chittenden

Mr. Kozar is Assistant Vice Chancellor of Human Resources at the University of Pittsburg and Mr. Chittenden is Executive Vice President and Head of Institutional Relationships at TIAA.

The economic implications of COVID-19 have been vast, shutting down businesses and forcing the highest unemployment rate in America since the Great Depression. While we’re just starting to fully understand how these disruptions will continue to impact our everyday lives, student loan debt continues to strain people of all ages. Today 1 in 4 Americans have student loan debt – an estimated 44.7 million people – and the number is increasing.

Even in normal times, the burden of paying off student loans can negatively impact other areas of personal financial management. Excessive student debt may cause people to delay getting married, buy a home or have children, according to a survey on the impact of student loans by the MIT AgeLab and TIAA. A large majority of American adults (84%) who are currently contributing to student loan payments report that student loans are negatively impacting the amount they are able to save for retirement.

The pandemic has made managing finances even more of a challenge, especially for essential workers such as health care workers, first responders and faculty and staff focused on administering distance learning programs. These positions often require extensive schooling and multiple degrees, resulting in large amounts of student debt.

Public Service Loan Forgiveness Program

Fortunately, employees who work in public service, including those at nonprofit higher education and healthcare institutions, may be eligible for Public Service Loan Forgiveness (PSLF). The PSLF program, which was established under the College Cost Reduction and Access Act of 2007, permits certain borrowers who make 120 monthly payments, while working full-time for a qualifying employer, to have the remainder of their balance forgiven.

While the program was designed to provide significant student debt relief to people who serve others, it has had a very low loan forgiveness rate, in large part because borrowers have difficulty understanding the rules and managing the paperwork associated with the program. In fact, 98 percent of PSLF Program applicants have been rejected for not meeting program requirements or because of missing or incomplete information on a form.

Even in normal times, the burden of paying off student loans can negatively impact other areas of personal financial management. Excessive student debt may cause people to delay getting married, buy a home or have children...

This is why it is critical for employers to provide assistance and tools to help their employees manage student debt. And in light of the economic fallout of COVID-19, there has never been a more important time to help nonprofit employees stay on track toward student debt forgiveness. Many individuals who work for eligible employers may not be aware of PSLF and the income-driven repayment plans that may help ease the burden of student debt. To help people manage this challenging balancing act, TIAA joined forces with social impact technology startup Savi to make it easier for their nonprofit client institutions to offer meaningful student debt relief services to their employees.

A Turnkey Solution

The new solution helps employees of nonprofit organizations to both reduce their monthly student loan payments immediately and to qualify over time for relief from the balance of their federal student loans by enrolling in the federal PSLF program.

The University of Pittsburgh was an early adopter of this program in March 2020, and in a very short period of time, participants calculated average loan forgiveness exceeding $55,000 upon successful completion of 120 months in the PSLF program. Pilot program participants were also able to lower their monthly payments for immediate relief, with some employees’ payments being cut in half. The average savings was approximately $1,700 a year. In total, among the pilot participants, the estimated the total debt that may be forgiven will exceed $14 million.

When considering student debt relief tools, a common misconception among HR managers is that the programs will be difficult to implement and confusing for employees to manage. However, TIAA is offering this service to client institutions as a turnkey solution, at no additional cost to institutions, to help them significantly expand the financial wellness benefits available to their employees.

As new financial realities have emerged as a result of the current economic situation there has never been a more important time to provide employees with the resources they need to manage student debt so they can give their full attention to their critical work.


TIAA-CREF Individual & Institutional Services, LLC, Member FINRA, distributes securities products. TIAA and Savi are not legally affiliated.

2 responses to “Measuring The Impact Of Student-Debt on the Retirement-Savings Process”

  1. C says:

    I’d like to know how to file a charitable organization as eligible for Student Loan Forgiveness so that our interns and new grads can benefit from the work they are offering the community.

  2. Christine says:

    Thank you for the info.