Millennials continue to shake up the workforce as employers come to notice that the new generation of employees is less interested in putting aside funds for a 401(k), and more concerned with paying down drastically high student loan balances.
According to Student Loan Hero, there are over 44.2 million student loan borrowers with more than $1.48 trillion in student loan debt, making an average monthly payment of $351.
Despite these relatively high numbers, employers are slowly buying into the idea of adding additional benefits geared toward student loan assistance. So much so, the Society for Human Resource Management recently reported only a mere four percent of companies offering benefits that help pay off student loans.
As the workforce’s demographic continues to shift, so will employees’ priorities—hence why it may be beneficial for HR leaders and business executives to reconsider the option.
How does it work?
Participating companies on average contribute between $50 -$100 monthly to the loan, with a cap of roughly $10,000. This amount is typically easier for HR and Payroll teams to manage when just starting the benefits program.
In most cases, employers require the employees receiving debt assistance to continue making their regular monthly minimum payment. This allows the contributions to go toward the loan’s principal—shortening the average life of the loan from ten years to seven, while simultaneously decreasing the interest rate.
Congress is currently mulling over the Employer Participation in Student Loan Assistance Act - H.R.795 to make the student loan repayment assistance benefit tax-free for employers. Once they have made a decision on the bill, experts predict it could be the spark to lure more companies to join the bandwagon.
What’s in it for the employer?
Companies offering student loan assistance as a part of their benefits package can expect to gain a leg up on their competitors in the battle to attract and retain top talent.
Leaving behind the days when simply offering a good-enough paycheck with health insurance was all it took to satisfy employees, job seekers, particularly millennials, are scouring the market in search of career opportunities that are offering something unique.
In fact, a survey conducted by American Student Assistance showed that nearly 80 percent of employees felt that a student loan repayment benefit would be a deciding factor in accepting a job—making it a significant employer differentiator in the market.
The same survey also revealed that 86 percent of employees would feel compelled to stay with an employer for at least five years in exchange for student loan repayment assistance, a huge saving for employers when it comes to talent management cost.
Though many assume the program will only benefit millennials, it’s worth noting that this benefit would equally grant financial relief to all employees, at all levels, who’ve taken on student loan debt either for themselves or to assist relatives in financing their education.
Industry experts expect that by 2019, there will be a 24 percent increase in the number of companies offering student loan assistance. It's always a good idea to stay informed of the latest in benefits trends. For creative ways to incorporate attractive benefits that are valuable to your employees at their current stage in life, contact your OneDigital representative.