According to the most recent 2015 data, student loan debt has reached a whopping $1.2 Trillion in the USA alone. A CNN report stated that:
Student loans have increased by 84% since the recession (from 2008 to 2014) and are the only type of consumer debt not decreasing, according to a study from Experian [credit agency], which analyzed student loan trends from 2008 through 2014.
This overwhelming debt and the pressure of making huge monthly payments is taking it’s toll on nearly 40 million people worldwide, most of all those working to support a family and protect their credit scores.
Your employees are under stress from student loan debt.
Chances are, a large portion of your current (and future) workforce is struggling in some way with student loan debt. Therefore, a possible benefit that companies should seriously consider is that of student loan payoff support.
A July 2015 study from intuition, a popular solution provider for student loan borrowers, revealed the following interesting data:
- 75% of the 1,000 student loan borrowers said they would prefer to work for a company offering student loan repayment assistance, including matching contributions and loan management tools.
- 55% of these individuals also said they would rather see employer health contributions go towards paying off student loan debt.
- 49% would prefer student loan payment contributions to retirement savings plans, like 401 (k)s
Younger employees who are fresh out of college face the biggest challenge when paying off student loan debt. Sadly, their take-home income almost never stretches far enough to cover loan payments and living expenses, so many are forced to live with parents until they start earning more. Even workers in mid-careers are struggling to pay down student loans when they are also trying to raise children, buy homes, and support aging parents. It’s a never-ending vicious cycle that too many people face daily, affecting their work performance and other aspects of their lives.
How many employers are currently offering student loan repayment benefits?
The Society for Human Resource Management (SHRM) advised that only 3% of employers actually offer some type of student loan repayment benefits to employees, and only around 1% of employers plan to offer this benefit in the near future. At the same time, SHRM reports that student loan debt reduces employee productivity. A 2015 Price Water Cooper House (PWCH) survey shows that:
20% of employees are distracted daily by their financial issues and 37% spend three or more hours per week worrying about personal finances.
Supporting employee financial wellness with student loan repayment benefits.
If a company wants to attract a solid workforce and improve productivity levels, it can easily implement a student loan repayment benefit. Give employees a choice of having company matched dollars for a retirement plan or a student loan repayment plan. They can still contribute their own pre-tax dollars if they wish to a retirement plan of some sort. Each month, pay a set percentage of the student loan debt with a direct payment to the issuing organization.
Give all employees access to financial wellness tools to help them manage their budgets, such as SmartDollar, which can help them with getting back on track with solid financial habits. Use education to help employees keep their student loan debt out of deferment and default. If employees are faced with garnishments stemming from defaults, provide access to the counseling and the financial benefits they need to get them restored to payment status.
As part of your overall benefit, include this information on total compensation statements. Provide a monthly statement showing the amount paid towards student loan debt.