With student loan debt now approaching $1.53 trillion, around 44 million Americans have considerable debt. In fact, CNBC reports that recent college graduates have an average of $37,172 or more due in student loan payments. Accordingly, more companies are presenting staff with a student loan repayment benefit this year.
For the employee burdened by student loan debt, a student loan repayment benefit can be a very attractive incentive. Here’s what you need to know if you’re thinking about implementing a similar offering at your organization.
Employers Are Taking an Active Role in Helping Employees Pay Student Debt
Employers have become increasingly interested in helping employees pay their debts, because they also stand to benefit. Debt puts a great deal of strain on employees, often reducing their productivity at work.
A joint study conducted by researchers from Cornell University, the Stanford Center on Longevity and Fidelity Investments found that four factors tend to influence well-being: health, money, work and life. After interviewing 9,000 working individuals, the study revealed that 98 percent of respondents reported “feeling stressed in the past three months.” Of this group, 33 percent noted the stress was due to paying off debt. In addition, the employees with the most financial stress and debt commonly suffered from illnesses (like gum disease) and exhibited absenteeism at almost twice the rate of others.
It’s easy to see why a student loan repayment benefit would be welcomed by employees dealing with debt, as they’re likely concerned with protecting their credit history while also trying to maintain a job. Employers can use this benefit to bring in talented professionals who want to secure their financial futures.
The Advantages of Offering a Repayment Benefit
In addition to assisting with recruitment, this type of benefit could help support better engagement—and loyalty—with existing employees. The American Student Assistance (ASA), a nonprofit organization that helps eliminate financial barriers to higher education, studied 502 workers aged 23–33 and found that 86 percent of employees would commit to their employer for five years if they helped pay off their student loans.
From a benefits standpoint, this is a very flexible offering that’s relatively easy to manage. Employees see this as a winning opportunity to manage money better with the support of their employer. This is especially important because the ASA report indicated that three out of five young workers say it’s a higher priority for them to pay off student loans than to save for retirement. Workers should not have to worry about living in poverty their entire lives just because they opted to earn a college degree.
Many student loan repayment benefit options are available and currently being offered by a number of companies. From the simplest—a cash benefit paid annually for contributing to a college loan repayment program—to a loan forgiveness program that pays a set amount per year of service until the loan is paid off, employers can choose what works best for them. The Society for Human Resource Management advises that the most effective programs include access to employer-sponsored financial counseling and education.
How to Implement a Student Loan Repayment Program for Employees
Any company that wants to create a student loan paydown offering can do so by setting up an annual benefit of whatever amount it wishes to provide employees. For example, a small company of 200 workers may set up a benefit of $1,000 for each individual. In return, employees who sign up for the benefit must provide proof that they are making payments toward a current student loan. At the end of the year, the employer can send the annual benefit to the student loan agency on behalf of the employee.
Alternatives to Student Loan Repayment Benefits
If a company is not ready to start making student loan payments just yet, there are other ways it can support the financial well-being of its employees. As mentioned, financial education and budgeting tools can be highly valuable. So are employer-paid tuition assistance benefits, which help employees to complete their education without needing more loans. Employers can also do their part by offering paid internships to help college seniors start paying off their debts before taking on a job, and then hiring them at above-average wages upon graduation.
Looking for additional ways your organization could offer a more attractive benefits package? Take some time to check out United Concordia Dental’s Employer Toolkit.