Graduating from college with student loan debt is about as certain these days as death and taxes, which means that your young employees are likely coming to you so saddled with debt that they can barely sleep at night. But debt doesn’t just affect their personal stress levels, it also affects their choices about what job to take and when to move on to their next gig and a potentially bigger paycheck. You can help improve employee retention by offering student loan repayment as a benefit.
A growing number of employers are recognizing the impact of student loans on their staffers and setting up student loan repayment benefit plans. In 2017, about 4% of employers offered student loans repayment benefits to their employees according to a study by the Society of Human Resource Managers. But that number is expected to go up with a survey by AonHewitt finding that 5 percent of companies want to add the benefit and 24% are interested in adding it. Companies currently offering the benefits include Fidelity, Chegg, and PricewaterhouseCoopers.
The Benefits for Employers
Offering this perk to your employees will benefit your bottom line and improve employee retention. Here are a number of reasons why it makes sense.
One key reason to offer student loan repayment assistance benefits is retention. With employee turnover potentially costing companies significantly in lost opportunities and productivity, companies are looking for ways to keep their best staffers from thinking about how the grass might be greener on the other side of the fence.
Student loan repayment benefits could stem a staff exodus or prevent it from starting in the first place. American Student Assistance found that 85% of workers aged 22 to 33 were likely to commit to staying at a job for 5 years if their company was helping them pay off their personal loans.
The war for talent is getting even more fierce these days. That’s leading some companies to enter a benefits arms race with their competitors. Student loan repayment assistance might help you win. An IonTuition white paper found that 80% of managers believed a student loan repayment assistance program would help them recruit.
After you’ve recruited the best staff and ensured that they’re committed to staying, you want to make sure they are engaged and productive. Student loan repayment assistance benefits also help here since staff who feel like their employer supports them are more likely to do a better job. Not worrying about their student loans will also free them up to be more productive and participate more at work.
If employees are worried about paying their loans and making their rent every month, they’re likely not going to be up for light conversations around the water cooler when the first of the month is approaching and rent is due. The IonTuition student found that 90% of managers believed student debt created stress and 80% of them believed it affected their employee’s productivity. In fact, 70% of managers believed that student loan repayment benefits could greatly boost morale.
Setting Up a Student Loan Repayment Benefits Program 101
Convinced your company needs to offer student loan repayment benefits? There are a number of ways to set up a program and to roll it out.
Repayment as a Signing Bonus
Some companies offer a lump sum of student loan repayment assistance as a signing bonus for new hires. This can be anywhere from $500 to several thousands of dollars for signing on. These types of bonuses are typically more prevalent in professional industries and aimed at lawyers, business consultants, and doctors. Many of these industries already offer signing bonuses for new hires and they either replace these bonuses with student loan repayment assistance benefits or they add them onto their package.
Repayment as Retention Bonus
Some companies decide to give out student loan repayment benefits as a retention bonus to their employees. They might offer several thousand dollars to staffers who stay with the company for 2 to 5 years. This encourages employees to stick around in order to take advantage of the benefit and therefore helps with retention.
Designing the Program
Once you know what kind of program you want to give your repayment assistance through, you need to decide how much to give and figure out the best way to do it. To set an amount, you might want to see if anyone else in your industry is offering repayment benefits and how much they’re giving. That could help you decide how much to give yourself. The IonTuition study found that 55% of companies contributed $1,000 or more towards repayment per employee.
The easiest way to set up the program is just to give a check to your employees earmarked for their student loans. But you can also set up a payroll deduction program similar to a 401(k) program where you deduct an amount from your employee’s paycheck and match it. There are companies that help facilitate the payment of this money to the staffer’s student loan servicer such as FutureFuel.io and Tuition.io. These programs often come with additional financial literacy and repayment components. These programs opt to use the benefit as a starting point, then introducing topics such as student loan consolidation, refinancing, and income-driven repayment plans.
Annual or Monthly Repayment Benefits
The majority of employers who offer student loan repayment assistance benefits do so on an annual or monthly basis. They have a certain figure – anywhere from $500 to several thousand dollars that they provide to their employees for year of service on either a monthly or annual basis. Some require that their employees match their contributions while others give the repayment assistance benefits no matter what.