$1.3 trillion. An amount so staggering it would make even Atlas’s knees buckle. Students in the U.S. have racked a collective $1.3 trillion in student loan debt.
Offering student loan repayment as a voluntary benefit is an easy and inexpensive way to help your employees reduce this crushing total. In 2015, the average student loan debt reached $35,000 per student.
As a result, it will take the average student over 21 years to pay off their student loan debt. As the average amount of debt continues to rise, it is important that businesses adapt to the needs of their employees. Debt repayment benefits help both your company and its employees.
What is student loan repayment?
Student loan repayment is a voluntary benefit, offered by an employer that pays back a portion of an employee’s student loan debt on a monthly or annual basis.
The company agrees to pay a specific amount each month, with some companies putting a limit on the number of years they will contribute. For example, a company may offer employees with student loan debt, $100 a month for up to five years.
Other companies offer the benefit as a lump sum after the employee works at the business for a certain amount of time. This money is applied directly to the principal total.
Some companies manage this benefit directly, while most use a third party to administer student loan debt repayments. Applying money directly to the principal reduces the total amount of debt and the monthly payment, which increases the benefit to the employee.
It is important to note that there is a large difference between tuition reimbursement and student loan debt repayment. Under current tax laws, an employer can provide a worker up to $5,250 in tuition reimbursement per year, tax-free. No amount of student loan debt repayment is tax-free.
What are the advantages of offering student loan debt repayment?
The first advantage that student loan debt repayment offers your business is in recruitment. Student loan debt repayment is an excellent recruiting tool. It is an especially effective tool for recruiting millennials, who are graduating with more average debt than any other generation.
A survey done by the American Student Assistance found that 76 percent of respondents said that, all other things being equal, their choice to take a job would be considerably affected or decided based on an employer’s willingness to offer a student loan repayment program.
Recent graduates aren’t focused on retirement. They are focused on the immense weight of the student loan debt they’ve accumulated over the past several years. A benefit that will help them ease this weight is an awesome recruiting tool.
Offering student loan debt repayment is also a way to show your employees that your company cares about them, and the problems that are important to them. Showing your staff you care about them may assist in increasing worker retention.
Employees who feel as if their business supports them, experience greater levels of satisfaction and engagement. The more satisfied and engaged an employee is, the less likely they are to leave.
Student loan debt repayment also affects retention in a more direct way. Only four percent of companies in 2016 offer student debt repayment. If your company offers this benefit it is likely that your competitors do not. An employee who values this benefit is less likely to leave if they understand that they will not receive the benefit at a different firm.
You can also increase retention if your student loan repayment system requires an employee to work a certain amount of time before they receive the benefit. This will make a worker think twice about leaving the company before they have reached that milestone.
Student loan repayment is a way for your business to set itself apart from competing firms. This benefit will help your firm to recruit and retain employees. Ease the burden that weighs on your staff, and assist them in shouldering the load of student debt.