The negative ramifications of student loan debt arefar-reaching, making financial wellness programs more importantthan ever. (Photo: Shutterstock)

With tuition rising almost eight times faster than wages, it isno wonder that millennial student debt has skyrocketed well beyondthe level experienced by their Gen X and Baby Boomer parents.

According to the National Center for Education Statistics, theaverage cost of a college education in 2016 was $104,480–double thecost of the same degree in 1989 (adjusted for inflation).Meanwhile, wages increased only $5,000 per year during the sameperiod of time, reports the Federal Reserve Bank of St. Louis.

Student loan debt reached an all-time high of $1.6 trillion thisyear, with the average college graduate leaving with a diploma–and$30,000 in loans.

The 2019 Poverty and Inequality Report fromStanford University indicates that in comparison to Generation X(born between 1965 and 1980), millennials (born between 1981 and1996) take out more and larger student loans and default morefrequently. The report attributes much of this to higher tuitionand the unfortunate timing of graduating into a post-recessionaryeconomy.

Unfortunate timing or not, more than half of millennials whotook out student loans say that going to college hasn't been worththe financial burden, according to a Morning Consult survey.

But the negative ramifications of student loan debt are farreaching, making the need for financial wellness education moreimportant than ever.

Home buying

Because of student loan debt, millennials are more likely to putoff buying a home until long after the age when their parents hadbegun building equity. A recent Zillow reportand SmartAsset study found:

●     25 percent of homebuyers have been denied a mortgage due to debt.

●     25 percent of rentershave been denied a rental agreement due to debt.

●     76 percent of homebuyers with student loan debt have a down payment of less than 20percent, which often increases the interest rate.

●     31 percent ofmillennials want to own a home but aren't currently saving forone.

The housing market rebound has increased both home sales andrental prices. According to the U.S. Census Global Property Guide, the averagecost of a home in the U.S. is more than 28 percent higher than itwas 10 years ago, and rental prices have increased by 33 percent inthe same time period.

However, since millennials are not buying homes, they are notreaping the benefits of rising home prices. Instead of creatingwealth with property like their parents did, they remain rentersand fail to build equity.

Saving and investing

Today's average millennial employee earns $35,592, which is 20percent lower (when accounting for inflation) than Baby Boomersearned at that age, according to SmartAsset.

Whether renting or paying a mortgage, these employees arespending between 30 and 40 percent of their annual income onhousing costs, according to data from the U.S. Bureau of Labor Statistics. Twentypercent of their annual income is going towards student loan debt,a TD Bank survey revealed.

Add in the cost of food, transportation, insurance, taxes andmedical care, there is very little left for saving andinvesting. This is corroborated by several recent surveysof millennials:

●     Only a third ownstock, down 20 percent from 2001 (Gallup)

●     Net worth is 20percent lower than Baby Boomers (Pew Research Center)

●     55 percent have noretirement savings, according to MorningConsult

●     About 75 percent haveless than $5,000 in a savings account and almost 50 percent livepaycheck to paycheck (GoBankingRates)

These employees will not be able to grow their retirementsavings through compounding returns—and they may not have the samelevel of Social Security benefits when they retire.

This means that millennials will retire later, which is costlyfor employers:

●     Healthcare costs for a65-year-old employee are double that of a 45 year old.

●     A one-year delay inretirement costs $50,000 per employee in sick leave, personalleave, life and disability insurance and healthcare (Prudential).

●     Younger employees haveless opportunity to advance, leaving them with stagnant wages ontop of student loan debt.

Mental health issues

Financial stress can lead to mental health issues. Blue Cross Blue Shield Health Index data showsthat depression is on the rise among millennials, increasing 47percent since 2013.

Financial stress has been linked to post-traumatic stressdisorder, substance abuse disorder, suicide and mental healthdisorders, especially among millennials.

Employees coming to work stressed by finances also deal withhigh rates of burnout, with millennials experiencing the conditionmore than other workers.

●     Gallup found that 30 percent of millennialsexperience significant burnout at work and 70 percent feel at leastsome burnout.

●     A PayChex study found that more than 50 percent felttheir mental health had a major impact on the job with another 38percent stating it had a moderate impact.

●     Because more than athird of millennials feel that their workplace contributes to theirmental health issues, 50 percent have voluntarily left a job formental health reasons (MindShare Partners Mental Health at WorkReport).

The cost of mental health issues to businesses is substantial.Presenteeism and absenteeism due to mental health conditions cost217 million days per year–$16.8 billion annually in lostproductivity, the MindShare Partners report found.

Consumer spending

The U.S. economy is driven by consumer spending, and millennialswith student debt often spend less on consumer goods. Student Loan Hero found that of those withstudent loan debt:

●     44 percent reducedtravel

●     33.5 percent limitedholiday spending

●     30 percent went outwith friends less

●     18 percent stoppeddonating to charity

When millennials spend less, companies have lower profits andslower financial growth. As those with student debt make paymentsrather than purchases, the usual economic uptick the country shouldexperience as millennials age will be decreased.

Employee financial wellness programs can help

Although student loans helped your employees get an education,the benefits can be outweighed by the burden of debt. Providing anemployee financial wellness program can make a big difference,however. In addition to helping employees create a budget and trackexpenses, financial wellness programs can do the following:

●     Explain student loandebt and the effects of forbearance and default and provideinformation on student loan consolidation

●     Teach employees aboutemergency savings

●     Provide simulators tosee how payment options affect debt

●     Explain how to improvecredit scores in order to get better rates for debtconsolidation

●     Teach the benefits ofretirement savings and different investment options

KrisAlban is executive vice presidentof iGrad, a San Diego-based financial technology company thatprovides artificial intelligence-powered financial wellnesssolutions to employers, financial institutions, colleges anduniversities. Its Enrich Financial Wellness platform isused by more than 20,000 employers and more than 300 financialinstitutions to provide behavior-changing financial literacyeducation to employees, customers and members.