Looking for a way to set your company apart and attract top millennial talent? Helping employees repay their student loans could be the answer.
Student loan debt is a huge source of anxiety for today’s workers, particularly millennials. A survey by American Student Assistance reports that 56% of employees often worry about repaying their loans and 40% fear that their anxiety about repayment has negatively impacted their health.
According to a survey by SoFi, 95% of workers under 30 would be more willing to accept a job if it offered student loan repayment. But while millennials highly value this benefit, only 4% of workplaces today offer it, according to the Society for Human Resource Management. For this reason, student loan repayment benefits can be a powerful differentiator for employers in today’s competitive market.
According to personal finance site Make Lemonade, student loans are now the #2 category of consumer debt (mortgages are #1). In the U.S., there are approximately 44 million borrowers owing a whopping $1.5 trillion in student loans, and over 2 million borrowers carry over $100,000 in loan debt.
In addition to attracting top talent, helping with student loan repayment can also bolster diversity initiatives.
As the cost of a college education skyrockets at far faster rates than inflation or wage growth, graduates are saddled with increasingly high debts. Recent grads are in particularly dire straits — college graduates from the class of 2016 owe an average of $37,000 each in student loans while the class of 2017 owes nearly $40,000, reports Forbes.
While the number of companies offering loan repayment programs is still small, a few typical models have emerged.
Many companies offer a maximum reimbursement amount per year and/or over the course of an employee’s tenure. Financial services firm Fidelity offers its employees up to $2,000 per year and $10,000 total toward repayment, as does healthcare company Aetna. Programs may have caveats — for example, Fidelity’s program is reserved for employees at the manager level and below, while Aetna’s limits for part-time employees are lower ($1,000 per year and $5,000 total).
For companies eager to address the needs of millennial recruits but unable to foot the bill right now, providing access to financial planning tools and debt counseling may be a good start.
At some employers, the program kicks off after employees attain a certain level of tenure and/or is only applicable for recent graduates. For example, the technology company Nvidia has a very generous policy — it repays loans for full- and part-time employees up to $6,000 per year ($30,000 total) — but employees must have worked at the company for three months and graduated within the last three years to be eligible.
Some argue that student loan repayment benefits are unfair for employees who don’t have student loans and therefore aren’t eligible for the benefit. Healthcare company Abbott addresses this concern in an interesting way. Rather than directly repaying student loans, Abbott provides a 5% 401(k) match to employees who contribute at least 2% of their paycheck to their student loans. For employees without loans, the company also offers this match if workers contribute 2% of their paycheck to their 401(k).
Related Article: 6 Surprising Statistics About Benefits Employees Want
In addition to attracting top talent, helping with student loan repayment can also bolster diversity initiatives, since a disproportionate number of women and people of color are saddled with student loans. Millennial women are 50% more likely to have student loan debt than men, according to a study by EdAssist. In addition, the National Center for Education Statistics reports that 86.8% of black students borrow federal student loans to attend a four-year public college vs. 59.9% of white students, and Hispanic and black students attending private nonprofit colleges graduate with more debt than white students. In other words, attracting employees with student loan debt can mean attracting a more diverse pool of candidates.
Related Article: Want Diversity in the Workplace? Rethink Your Recruitment Process
Student loan repayment programs may also help with retention. The study by American Student Assistance cited above found that 86% of workers aged 22 to 33 said they would be more likely to commit to a job for 5 years if their employer offered repayment benefits.
Given these statistics, it may seem like a no-brainer to institute a repayment program at your business ASAP. But there’s one major con to this much sought-after perk — it’s expensive. Student loan repayment benefits are currently not tax-deductible at any level (unlike, say, tuition reimbursement programs), though a recent bill seeks to change this. Rep. Rodney Davis, R-Illinois, introduced the Employer Participation in Student Loan Assistance Act, which would allow employers to deduct repayment subsidies up to $5,250 per year.
But for now, “expense is a big reason why adoption has been limited primarily to large corporations and small, tech-focused startups that must attract highly skilled millennials,” reports the Society for Human Resource Management.
For companies eager to address the needs of millennial recruits but unable to foot the bill right now, providing access to financial planning tools and debt counseling may be a good start. According to the American Student Assistance survey, 89% of workers say they would utilize long-term financial planning help, while 79% would take advantage of free access to a student debt loan counselor. While not quite as sexy as repayment programs, this option allows companies to key into what today’s workers want while still being realistic about their bottom line.
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