According to The Wall Street Journal, there are more than 43 million student loan borrowers who owe a total of over $1.4 trillion in student loans.
That number is only set to increase, as each graduating class is accumulating more and more debt. According to the same source, a graduate from the class of 2016 took out an average loan of $37,000 while a graduate from the class of 2017 typically owes around $40,000.
In addition to the sheer amount of money owed, the crippling interest rates applied to these loans are making loan repayment the top priority of recent graduates or those who plan to graduate soon—the same people who are entering the workforce.
Employers and brokers can address these concerns by offering a student loan repayment program as part of their employee benefits.
Student Loan Repayment Programs: The Hottest Benefit of 2019
Human resources professionals and brokers alike are always asking how they can add more value to their benefit offerings. The answer: help employees tackle their number one concern—their student loan debt. In fact, 45% of student loan borrowers stated that after health insurance, student loan repayment was the most important benefit they could get.
A well-developed student loan benefit can:
- Increase recruitment and retainment. Benefits are arguably more convincing in attracting potential employees than salary. About 90% of job candidates said that a student loan repayment program would have a positive impact on their decision to accept a job and stay at a company that was providing assistance. A benefit that can help them get out of debt while building income is highly desirable for young workers—and is something they are not likely to easily give up.
- Provide a win-win benefit. Some student loan lenders offer companies the option to contribute to student loan repayment or not, so some programs come at zero cost. Employees reap the benefit of getting out of debt faster and saving money in the long run (by avoiding interest) no matter what, so this can end up being a win-win situation.
- Encourage retirement savings. Employees in debt often face a choice of paying off their loans or saving for retirement. Loans are often the priority, so they fall behind on retirement savings. Helping employees get out of debt faster eliminates this dilemma and allows them to enroll in retirement savings programs sooner.
Implementing a Student Loan Repayment Program
You can set up a robust student loan repayment program by following a few best practices:
- Start small. Set the contribution point low to start with, and take it from there. Whether the program has employer contribution or not, you want to make sure the contribution level is set at a reasonable amount to begin with, and assess employee feedback from there.
- Make it accessible. Some benefits have a time or tier requirement for participation. Since student loans are time-sensitive and often affect younger employees most, make it available to them from their start date and without any requirements. This almost guarantees increased participation.
- Require accountability. Make sure that employees are making at least the minimum payment on their own to participate in this benefit. This will eliminate abuse and ensure that employees are truly using it to help them get out of debt faster, especially in plans where employers contribute.
- Communicate thoroughly. Make sure employees know the full scope of the program before enrolling. Explain if the contributions are taxable, and how it will affect their payroll and tax return. That way, there are absolutely no surprises and minimal negative experiences.
Interested in implementing or offering a student loan repayment program? Contact us with any questions.