If you’re looking for employee benefits that will impress potential hires, use your offerings to address one of the largest anxieties recent grads tend to have: student debt.
Nearly 45 million Americans have student debt, totaling $1.47 trillion. It’s a huge issue in America right now, so it’s no surprise that student loan repayment is becoming one of the most desirable benefits that employers can offer. Here’s a look at why debt repayment is so popular and how you could implement it at your business.
The Benefits of Student Debt Repayment
For talent seeking a place to shine, the benefits package companies offer is often a deciding factor. Providing a student loan repayment program can put your company ahead of the competition. Studies have shown that 78% of employees who have student loan debt want their company to offer this benefit. On top of that, 86% of employees say they’d commit to staying five years at a company that helped with student loans. That’s a hefty retention rate.
Job-hunters, meanwhile, have begun looking specifically to see if a company offers some type of loan assistance. In a tight job market like today’s, offering a student debt benefit could not only increase retention but also attract new talent, especially since most companies don’t yet offer this benefit.
Student loan benefits can also improve your employees’ overall well-being. Money is the second-largest source of stress among Americans, and 4 in 5 companies have said financial stress affects work performance. Unaddressed financial stress can also lead to millions of dollars’ worth of lost productivity. Easing the burden of student loans may allow employees to take fewer sick days and be more productive.
How to Launch a Repayment Program
There are a number of ways to design a student loan repayment program. From simple setups to more complicated arrangements, consider these three strategies for offering student loan repayment.
- Make monthly contributions to employees’ loan providers. This payment could be no-strings-attached, or a business might require that staff either match that payment or at least commit to making the monthly minimums. This way, employees are incentivized to maintain their own contributions. The payments count as income and are taxed by the IRS, but the program is simple to start. (Note: Some lawmakers want these payments to be untaxed, so ask your attorney or financial adviser about the current tax laws.)
- Exchange paid time off for student loan payments. In this framework, the employer calculates how much they pay for an hour of an employee’s work and uses that figure to make a contribution directly to a loan provider based on hours of paid time off not taken. Some companies have a cap, such as letting employees trade up to 40 hours of PTO carried over from the previous year.
- Use retirement contributions as an incentive. This plan essentially pays employees retirement money if they commit a portion of their paycheck toward student loans. In one example, 2% of employees’ paychecks could be deducted directly for student loans. In exchange, they received a contribution to their 401(k) that matched 5% of their salary. The company that offered this plan worked with the IRS to get it approved, so if you want to do something similar, you’ll want to speak with your attorney. This plan is the most complicated — but the loan payment itself is tax-free.
To launch your own student debt repayment benefit, start by choosing the type of repayment benefit that makes the most sense for your business. A simple direct contribution could be the easiest way to gauge interest. Remember: You don’t have to start huge. Even contributing $50 or $100 a month can make a big difference to an employee.
As you start the program, email employees brochures with the details and hold a workshop explaining how the benefit works. Follow it up by offering to meet individually with anyone who has questions. Then, highlight the benefit in interviews with candidates whenever you’re recruiting.
A student loan repayment benefit can be a win-win for both employers and employees. Out of all your employee benefits options, this might be the best one to add — and starting a program doesn’t even have to be very complicated. Discuss the current laws with your attorney and ask how you can launch a program at your business.
Stay up to date on the latest health care regulations and trends for your small business: Subscribe to our monthly newsletter.