With the drastic rise in post-graduation student loan debt ($1.56 trillion total in 2019), more employers are jumping on the bandwagon of offering student loan repayment benefits to attract top talent. Employees with high student debt factor in their monthly payments when considering whether to accept the benefits package your organization offers.
According to a 2019 survey, approximately 4% of employers have adopted these employee benefits. When deciding whether or not this would be feasible for one’s organization, there are several aspects to consider and discuss with the decision-makers.
More than a Paycheck
Employers should assume their competitors are also offering a competitive wage and perks that stand out. In this tight job market, recent college grads can be choosier when it comes to accepting job offers than ever before. Universities have emphasized the importance of finding a job that not only pays well — but also aligns with the employee’s values, has a strong culture, and offers exceptional benefits.
Trendy perks such as gym stipends, bringing your dog to work, and unlimited vacation days all appeal to the younger crowd. Offering the highest salary alone does not cut it anymore; 35% of millennials have turned down job offers because they were dissatisfied with the benefits, compared to 27% of all other age categories. Young job hunters want to work for an employer that heavily invests in them, and they will measure the benefits of each role they apply for before making their final decision.
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One of the heaviest financial burdens millennials face is piled up student loan debt. According to Student Loan Hero, about 69% of students from the Class of 2018 took out student loans, graduating with an average debt balance of $29,800. Paying these off is no walk in the park. In fact, most student debt holders take about 10 years (or 30 for consolidation loans) to pay off their loans. With 72% of millennials being more likely than baby boomers to be attracted to another company that cares more about their financial well-being, offering company benefits that assist employees in paying off this huge sum of money is sure to attract this generation of top talent.
Potential Organizational Benefits
Offering student loan repayment benefits doesn’t have to make a large dent in a company’s budget. Putting $50 a month towards each employee’s loan repayment can be a huge help, as well as reduce the time in which they have to pay them off. While supporting employees’ financial needs is great, what is in it for the employer? Here are some advantages of adding loan repayment programs to a benefits package:
- Quickly recruit college grads: Recent-grads come with some of the freshest knowledge and, better yet, some of the highest energy levels to hit the ground running. They know paying off their student loans is going to be tough — so, coming across as an organization that is willing to help them knock out this debt is going to be extremely appealing.
- Get employees to enroll in the company’s 401(k) plan: The lesser amount of debt the employee has, the more willing they will be to participate in their company’s 401(k) plan. If a company reaches the threshold for 401(k) participation, they will receive various tax benefits.
- Reduce your employees’ stress levels: Relieving one of the largest financial burdens many employees will ever face can reduce stress, leading to a potential increase in productivity at the office.
Crucial Things to Consider
Employers should consider answering the following questions to work out the kinks of their plan:
- How would this affect your current benefits package?
- How much will you offer?
- Will you only provide for federal loans?
- Will you limit the total amount you provide?
- Will anyone be exempt from this benefit?
- How will you ensure the money goes to employees’ loans? If so, how will you address resentment from those who don’t benefit from this perk?
Offering student loan repayment benefits to employees can be an absolute game-changer for an entire company. So long as the employer lays out the specifics of their plan and ensures the plan aligns with the company’s culture, incorporating this perk into the benefits package will work to the organization’s advantage.
As your clients decide what benefits make the most sense for their organization, compliance is key. Leverage Collaborative HR from Mammoth with a combination of HR Consulting and technology to create winning relationships across the HR ecosystem.