Understanding Financial Well-being for LGBTQ+ Employees

In recent years, research has revealed a significant disparity in the financial well-being of LGBTQ+ adults compared to the general population, particularly among transgender people and LGBTQ+ people of color. The major drivers behind this wealth gap? Lower rates of inheritance and family support, as well as discrimination in housing, financial services, and employment. For the 8.1. billion LGBTQ+ workers in the U.S., these social and economic inequities have a cascading effect on all aspects of financial well-being — from student loan debt to homeownership to retirement savings.

As an HR leader, you’re in a unique position to help break down the barriers standing in the way of your LGBTQ+ employees’ financial success. Here’s a look at some of the challenges they face and how employers can help.

$92 Billion in Federal Student Loans

LGBTQ+ adults are carrying an overall higher burden of federal student loan debt — some $93 billion in total — than their non-LGBTQ+ peers, according to a 2021 study published by the UCLA School of Law Williams Institute and the 20 Points Foundation.

The study found that more than a third (35.4%) of LGBTQ+ adults ages 18 to 40 — an estimated 2.9 million — have federal student loans, compared to 23.2% of their non-LGBTQ+ peers. On average, LGBTQ+ borrowers owe $47,500 in total student debt, compared to a general population average of $32,731. About four out of 10 LGBTQ+ adults holding federal student loans also have student debt in the form of private student loans from a bank or other lending institution, credit cards, or other loans.

For many LGBTQ+ borrowers, student debt is tied to their home living situation, with some turning to college (via student loans) as a way out of unaccepting homes, notes a 2019 report from the nonprofit group Summer & Student Debt Crisis. What’s more, only 25% of LGBTQ+ borrowers aged 25 to 29 receive family assistance in paying off their student debt, compared to 53% of non-LGBTQ+ borrowers.

How Employers Can Help

A provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act allows employers to make tax-free student loan contributions of up to $5,250 annually through 2025. (Before CARES, only tuition reimbursement was allowed, and employees had to treat a student loan repayment benefit as income.) Offering this benefit can be a lifeline to many employees, and LGBTQ+ workers in particular.

Other ways to help lift LGBTQ+ employees weighed down by student debt include offering one-on-one counseling sessions with personal finance or student debt repayment advisers and educating employees about alternative payment plans, such as filing for forbearance or a government income-driven repayment program or refinancing with a private lender.

The Homeownership Gap

A 2020 report published by UCLA School of Law Williams Institute found that significantly fewer LGBTQ+ adults and same-sex couples own homes compared to their non-LGBTQ+ peers. Indeed, just under half (49.8%) of LGBTQ+ adults own their own homes, compared to 70.1% for the rest of the population in the U.S.

The disparity isn’t due to a lack of interest in homeownership. A 2018 study conducted by Freddie Mac (the most recent data available) found that three-quarters of LGBTQ+ renters agreed that owning is a good financial investment, and 72% said they want to own a home in the future.

Unfortunately, LGBTQ+ adults face more than financial barriers to homeownership. According to the Williams Institute report, same-sex couples frequently encounter system-wide discrimination by mortgage lenders, including lower approval rates and higher interest rates and/or fees compared to their non-LGBTQ+ peers.

How Employers Can Help

HR leaders can help LGBTQ+ employees achieve greater financial stability and control over their lives by offering a range of homeownership benefits.

One cost-effective approach is to partner with local mortgage professionals, banks, financial planners, and realtors to create information seminars on the basics of home-buying, such as different types of mortgages and rates, trends in the local market, and how to save for a downpayment. If possible, bring in financial resources and professionals that are part of the LGBTQ+ community — this will ensure that the information provided is relevant to the needs of LGBTQ+ home buyers, such as finding a safe, inclusive neighborhood. You may also be able to find a mortgage lender that can offer a discount to your employees.

The Cost of Discrimination

Lower wages and the cumulative effect of discrimination over time have led to higher financial fragility rates among LGBTQ+ workers, particularly transgender people and LGBTQ+ women of color.

According to a January 2022 report from the advocacy group Human Rights Campaign, LGBTQ+ workers earn 90% of the median wage of full-time employees in the U.S. This disparity grows when LGBTQ+ salary data are disaggregated by race, gender, and gender identity. For every dollar the typical U.S. worker earns, female LGBTQ+ workers earn 87 cents, transgender men earn 70 cents, transgender women earn 60 cents, and black LGBTQ+ workers earn 80 cents.

LGBTQ+ workers are also less likely to have savings, retirement accounts, life insurance, and other resources that create stability in the face of adverse events. According to the Center for LGTBQ Economic Advancement & Research (CLEAR), only 35% of LGBTQ+ people have employer retirement plans, compared to 40% of the general population. More worrisome: Half of LGBTQ+ seniors (51%) are concerned about having enough money to live on during retirement (vs. 36% of their non-LGBTQ+ peers); 42% expect to outlive the amount they have saved (vs. 25%). Financial worries add up to a distressed workforce, which can eat away at productivity.

How Employers Can Help

A robust financial wellness program provides support to all employees but can be particularly valuable to LBGTQ+ workers, who may not have historical financial education, and may need more assistance building generational wealth.

Consider leveraging your LGBTQ+ employee resource group (ERG), if available, and/or conducting a financial wellness assessment to learn about the specific financial challenges your LGBTQ+ employees are facing. This can help you design benefits, resources, and programs that specifically address their most pressing concerns.

In addition to retirement benefits (and, ideally, matching contributions), you may want to offer an emergency savings plan (funded with automatic deposits) to help LGBTQ+ employees gain more financial stability in the face of unexpected events. Financial planning seminars and credit building support are other tools that can help LBGTQ+ employees become more financially resilient.

The Takeaway

The financial needs of the LGBTQ+ population are unique because they often face different challenges than the general population. SoFi at Work can help you to analyze the credit, debt load, and overall financial well-being of your LGBTQ+ employees, and then design the benefits and resources to address their needs.

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