No matter the industry, attracting top talent can be a tricky endeavor. From entry-level openings to C-suite positions, it’s important that your company stands out to candidates possessing the skills needed to further the goals and mission of your organization. Lucrative benefit plans routinely are some of the most common and impactful ways to win over a prospective employee who is weighing multiple job offers. With this in mind, employers tend to be imaginative and aggressive when putting together benefits packages on an annual basis.
The days when a solid health insurance plan and a 401k sufficed are now behind us. Today, in an effort to offer ever-more attractive perks, forward-thinking organizations are investing resources into upskilling and educational offerings, flex-work opportunities, emotional and physical health support plans, and at times, relocation packages.
One of the most recent benefits trends, and a worthy investment considering the burden and stress it can cause employees, is student loan repayment assistance.
Student loan debt is at historic levels
Even before the COVID-19 pandemic, borrowers were struggling to repay student loans. Collectively, Americans owe $1.6 trillion on student loans, and making up the second-highest consumer debt category, behind just mortgage debt. And according to Experian, it’s not just one subsect of the U.S. population struggling with it – all generations share the financial burden, with Generation X holding the highest average in student loan debt, followed by Boomers.
Attract, retain and improve productivity
Considering how much stress student loan debt can cause, benefits that help lessen this strain are powerful retention tools. According to The Society for Human Resource Management (SHRM), 86% of employees said they would commit five years to a company if it helped them repay student loans.
With that said, it’s still not a benefit that companies routinely offer. Even with many employees expressing interest in student loan repayment benefit plans, the same SHRM report states that just 4% of U.S. organizations offer the perk.
Debt is a daunting burden for almost everyone. According to a survey from American Student Assistance (ASA), more than half of employees ages 22 – 33 worry about student debt, and almost two-thirds (65%) have contemplated getting a second job to help with loan repayment. Research from the American Psychological Association (APA) also reveals that financial stress can lead to memory lapses, heightened adrenaline and chronic anxiety or stress, which all can drastically decrease productivity.
Tips for getting started
A student loan forgiveness program can be flexible and customized to fit your organization’s needs. Usually, student loan repayment plans are managed by a third-party company, allowing employers to make monthly contributions directly to employee’s student loan provider, which eliminates the need for an employee to act as a middleman to distribute funds toward their loan.
Regardless of if your company wants to make a monthly contribution, employer match or offer student loan repayment assistance in lieu of 401k or other benefits, a number of third-party platforms exist that can complement these efforts. It’s important to recognize the costs of partnering with a student loan forgiveness program and pick what makes the most sense for your company. For instance, many of the vendors offering these services for no charge can be misleading.
According to The Benefit Company, vendors that don’t charge for their services usually are a financial institution offering refinancing, or a third party receiving a referral fee and/or a percentage of the interest of refinance fees. Instead of providing the best advice, these vendors often will push refinancing as the best solution to student loan debt. Vendors that charge a fee upfront are more likely to support your organization’s efforts instead of pushing refinancing as the best option.
Gradifi and Vault are vendors that specialize in student loan repayment support as a benefits package and have experts who can give guidance on the types of plans that make the most sense for your employees and organization. Many of their services also go beyond the repayment plans, which include providing tools and learning resources to further support employees’ financial health, and they’ll collaborate with HR teams to utilize this benefit when working to attract new talent.
Start small, test and build
When deciding to implement a student loan repayment benefits plan, a typical starting point is anywhere from a $50 to $100 monthly match per employee. In the first year, start small to see who participates, and reassess the plan on a yearly basis to make sure the offerings and process and working for your employees and company.
Hold employees responsible
When offering a student loan benefit program, consider offering it as a match, and not as something employees can depend on without making payments themselves. It’s also smart to remind them to institute auto-pay because it eliminates the chance of forgetting or missing a monthly payment.
David Aronson, CEO of Peanut Butter, which helps employers offer student loan assistance as a benefit, also suggests having employees set up payments through a direct deposit with their bank, as many loan servicers offer a .25% interest-rate discount to those who do so.
Get support while supporting employees
More than ever, it’s a good time to start gauging whether a student loan repayment program is right for your organization. Section 2206 of the recently passed Coronavirus Aid Relief and Economic Security (CARES) Act focuses specifically on student loan relief. It allows employers to make payments up to $5,250 toward employees’ student loans tax-free through the end of 2020.
The best employee benefit packages are the ones that meet the needs of their employees. While so many American workers are facing student loan debt, which is known to negatively impact both mental health and productivity, employers should evaluate this benefit to determine if it might be a way to not only retain and help existing employees, but also attract new ones.
If you could use help assessing the right benefits for your organization, we’d love to help!