If someone gave you $1.6 trillion, what would you do with it? Chances are one action you wouldn’t take is to pay off everyone’s student loan debt. But, if you were to come into a spare $1.6 trillion, you could do precisely that. Because, as of 2019, Americans have accumulated more than $1.6 trillion in outstanding student loan debt.
And, unfortunately, employers have taken more and more of the responsibility for this excessive debt. But for many people, this figure may appear too large to handle. Where do you begin with such a staggering sum?
The first step employers can take to help their staff deal with student loan debt is to offer student loan repayment plans. In this article, we’ll define these plans, then explore their advantages to both employees and employers. Keep reading to find how these student loan repayment plans can boost your business.
What is a Student Loan Repayment Plan?
A student loan repayment plan is a voluntary benefit an employer can offer to their staff. The benefit pays back a portion of an employee’s student loan debt on a monthly or annual basis. A company agrees to pay a specific amount each month. Some organizations put a limit on the number of years they will contribute.
Other companies offer the benefit as a lump sum after the employee works at the business for a certain amount of time. Most student loan repayment plans apply payments directly to the principal total, which helps to lower the number of subsequent interest payments as well.
Advantages of Student Loan Repayment Plans for Employees
1. Less Stress
The first advantage of student loan repayment plans for employees is it can help reduce stress. According to the Financial Fitness Group, over 80 percent of employees have been affected by stress. And one of the most significant causes of stress is finances.
According to a Willis Towers Watson survey, 31 percent of employees said their money concerns affected their work. This statistic shows debt, like that resulting from a student loan, can have a significant, adverse impact on your staffs’ productivity.
But your organization can use student loan repayment plans to cut into this stress. Student loan repayment plans can systematically reduce both the principal amount of the loan and monthly payments.
2. Better Health
Another advantage of student loan repayment plans for employees is it can improve their health. As previously mentioned, financial issues, such as student loan debt, can cause a tremendous amount of stress amongst your workers. And per the Willis Towers Watson survey, 74 percent of people feel stress daily about their student loan debt and spend time at work thinking about it.
Stress can contribute to increased depression and anxiety, and poorer sleep. Anxiety and depression subsequently wreak havoc on an employee’s life and productivity. Depression causes an estimated 200 million lost work days each year. You can combat these adverse effects of financial stress through a student loan repayment plan.
3. More Money
The final advantage of a student loan repayment plan is it gives employees more money. Last year, the average student graduate entered the workforce with $40,000 in student loans. The size of this debt makes the possible savings from a student loan repayment plan, even more attractive.
If refinancing is an option through your plan, employees have the potential to save thousands of dollars over the life of the loan through a lower loan interest rate and lower monthly payments. Also, because most repayment plans apply payments directly to your loan’s principle, subsequent interest payments are also smaller.
Advantages of Student Loan Repayment Plans for Employers
1. Better Recruiting
The first benefit of a student loan repayment plan for employers is better recruiting. According to BenefitsPro, 78 percent of employees want their employer to provide a student loan benefit, to help them with their debt. Younger employees, especially, desire this benefit.
A survey from American Student Assistance discovered student loan debt is the most substantial financial concern for workers aged 22 to 33. Similarly, the report found that 86 percent of employees will commit five years to a company in exchange for student loan repayment help.
But it’s not just millennials who desire this employee benefit. Per the BenefitsPro study mentioned above, 65 percent of workers over the age of 55 have, or will have problems with current or future loan debt.
2. Improved Retention
An additional advantage of student loan repayment for employers is improved employee retention. According, to the Society for Human Resource Management, only 4 to 5 percent of employers offer student loan benefits. The small number of employers who provide this benefit makes it that much more impactful.
And, because it’s such a valued benefit, if you are one of the few employers who offer it, you’re more likely to retain your staff. The popularity and usefulness of this benefit also helps to bolster your employee retention.
One survey by Laurel Road found 58 percent of millennials would trade an additional vacation day for student loan forgiveness. This number demonstrates how much employees value and would give up for a student loan repayment plan.
3. Decreased Absenteeism
A study by PricewaterhouseCooper discovered financial stress, among many negative effects, increases employee absenteeism. Student loan repayment plans, as previously discussed, help to decrease depression and anxiety that results from financial stress.
The more you can relieve employee stress and anxiety; the less likely these workers will be to stay home from work. A student loan repayment benefit can keep employees out of the doctor’s office and keep them on the job.
4. Fewer Costs
One of the most important advantages of a student loan repayment plan is it can save your company money. It might be antithetical to believe, but utilizing a benefit that includes the word repayment, doesn’t have to cost you that much.
Per Employee Benefit Adviser, some student loan repayment options are available at no cost to the employer. Plus, as previously mentioned, this benefit can help make your employees happier and healthier, which saves your organization money too.
If your company improves its retention rate, it also reduces the costs associated with employee turnover. According to Work Institute’s 2017 Retention Report, it costs employers 33 percent of a worker’s annual salary to hire a replacement worker if an employee leaves.
In dollar figures, the average replacement cost for an employee earning a median salary ($45,000) is $15,000 per person. Any reduction in employee turnover helps to lower the costs associated with advertising, hiring, and training a new worker.
Similarly, student loan repayment plans can help make your employees healthier, which saves your firm money. Reducing your employees’ stress lets your company reduce costs due to loss of productivity. Per Mental Health America, stress costs employers $500 billion in lost productivity.
Financial stress alone costs U.S. businesses close to $300 billion a year in unscheduled absenteeism, reduced employee productivity, and higher employee turnover. Utilizing a student loan repayment plan can lower employee stress which improves their overall health.
5. More Productivity
The final advantage of student loan repayment plans is a potential increase in productivity. Measuring and improving productivity has been, is and will be essential for any successful business. We’ve already mentioned almost three-fourths of employees feel stress daily about their student loan debt and spend time at work thinking about it.
This time spent at work worrying about student loan debt has a tangible, negative impact on overall productivity. Instead of getting work done, financial stress can distract employees and limit their workplace effectiveness.
Chances are nobody will hand you $1.6 trillion in the next few days and help you change your life. But you could transform your workplace by implementing a student loan repayment plan. Recruit better, improve retention, decrease absenteeism, lower costs, and boost productivity all with one benefit.