Today’s level of student debt is at an all-time record high, and it’s causing tremendous stress within the workforce. A PwC survey revealed that 80% of millennials believe that their student loan debt has gotten in the way of other financial goals, including buying a house and saving for retirement.
Employers should note that just because someone is employed, does not mean that they stop worrying about student loan debt. In fact, it might be affecting much of your workforce right now, which in turn could be affecting your business.
How your employees’ debt is affecting your business
Without even realizing it, student loan debt may be affecting your business in the following ways:
Recruitment. According to ADP, many younger workers are carefully considering their monthly loan payments when setting salary expectations. When looking to recruit those who are moving past their first job and into more substantial positions, whether or not your salary offering can cover their payments can be a deal breaker.
Retainment. High levels of debt means that your employees are more likely to leave to pursue higher salaries. Since getting out of debt is a top priority for many of your employees, it’s possible that they would leave an otherwise good position in pursuit of higher income.
Employee Health and Productivity. Having a large sum of debt, especially one with high interest rates, is extremely stressful for employees. Not only can stress cause a drop in productivity at work, but it can lead to serious mental and physical health issues that can have a lasting impact.
Benefit Participation. An survey showed that most employees who have student loans have put off participation in 401(k)s and other retirement investing opportunities. Since they need more money in their pockets to keep up with student loan payments, they are less likely to participate in benefits that are not considered essential, like health insurance.
What employers can do
Employers can offer a student loan repayment program as an employee benefit, to assist their employees and to address the negative impact of student loan debt on your business. Some employers are offering student loan refinancing options, where they connect their employees to resources that offer private loan refinancing. Some are simply allowing employees to devote some of their pre-tax paycheck directly to student loan payments. Others are offering benefits based on loyalty, that increase over time and may even include an employer contribution.
Whichever path you choose to take as an employer, you are taking steps in the direction of addressing a serious workplace challenge with a large impact on your business.
Proposed legislation could even allow for tax breaks for both employees and employers who offer certain amounts of student loan reimbursements. With these benefits in mind, it’s seriously time for employers to consider offering student loan repayment programs if they don’t do so already.