Should Your Company Offer Employee Loan Repayment?
According to Time.com, the current average student-loan debt for graduates from a four-year college or university is $29,000. This number only gets higher from here, depending on if students attended a private university - and higher yet for those who go on to get their masters or PhDs.
But why should an employee's college debt - regardless of how large or how small - be of any concern to an employer? Because it has the potential to be one of the most attractive hiring benefits out there, differentiating your company from all the others.
The Mental and Physical Effects of Student Loans
A study conducted by the University of North Carolina has found that student debt can have "measurable mental and physical effects" on graduates.
Another study, published in 2013, titled Anxiety, Coping and Stress, found that "those with greater financial strain perceived more stress, [and] had more symptoms of depression, anxiety, and ill-health."
Now imagine if a job candidate is offered two equally desirable positions with two outstanding companies, but one provides employee loan repayment and the other doesn't. You can see how attractive this benefit could be to a potential hire - and why offering it could not only sway their decision to work at your company - but keep them there long-term.
Benefits of Offering Loan Repayment
There are a number of reasons you should consider offering employee loan repayment, including:
- There are a number of reasons you should consider offering employee loan repayment, including:
- To retain current top employees
- To foster job satisfaction and loyalty
- To boost employee morale
- To stand out amongst competitors
- To keep your company relevant in the current job market
Employers who offer this benefit now will have an early-adopter advantage, as only 3% of companies offer student debt repayment as of December 2015. But the Boston Globe states that this benefit should become widespread in the next five years.
However, boosting team morale is not the motivating factor for offering this benefit to employees. The Boston Globe quotes Bruce Elliott, a manager for compensation and benefits at the Society for Human Resource Management (SHRM), as saying, "Employers don't do this to be nice. It's absolutely an investment."
How to Implement This Benefit
The great thing about offering employee loan repayment is that it can be modified to accommodate your budget, while remaining an enticing benefit to new and existing hires.
In an article for Time, author Kerry Close states that Fidelity offers full-time employees at the manager level or below $2,000 a year toward their student loan balance, for a total of up to $10,000.
Another company, PricewaterhouseCoopers, will give employees $100 a month (amounting to $1,200 each year) to help pay down student loans. The company's offer is good for up to six years, says Close.
Natixis Global Asset Management, the Boston-based division of French investment bank Natixis, says Close, "rewards loyalty with $5,000 put toward employees' student loan balance after their five-year work anniversary. They also receive $1,000 a year for the next five years."
"Online homework helper Chegg," states Close "offers employees a $1,000 annual contribution, after taxes, toward their student loan balance. It also provides an online student loan management tool to help workers maximize their payments."
Your budget will dictate whether or not you can offer anything like the companies above, but you should also take a look at what your competitors are doing. Do they offer this benefit, and if so, can you match it or do better?
Some additional options include:
- Paying employees' monthly bills for as long as they work there up to an annual limit
- Paying a specific flat amount every year up to an annual limit
- Offering 50% of what employees' owe monthly up to an annual limit
You will also need to determine who will be eligible for this benefit. Full-time employees only or will you also offer any assistance (on a smaller scale) for part-time employees? Or, will this benefit only be available to those at managerial levels?
Setting strict parameters around this benefit will ensure current and prospective employees know, without any uncertainty, whether or not they will be eligible.
Giving Employees What They Want
While it's crucial you offer only what is fiscally responsible for your company, if you're able, including employee loan repayment as a hiring benefit can set your company apart from all the others.
"In fact," states Close, "a July 2015 survey from IonTuition found that about half of the student borrowers who were interviewed would prefer that their employer help pay off their loans than contribute to a health care or 401(k) retirement plan."
As you can see, employees clearly want loan repayment assistance, but the majority of companies aren't offering it. If it's feasible for your company, putting loan repayment into your benefits package could be what helps you successfully compete for, hire, and retain the best and brightest employees in today's workforce.