A hot new offering in the world of employee benefits is quickly finding its way into many employers’ plans. Student loan repayment plans as a new employee benefit are on the rise because of the need that spans multiple generations of employees. According to the most recent 2015 SHRM employee benefits survey, only 3% of employers currently offer this benefit, however, this number is expected to grow to over 26% by 2018.
Why are employers looking at these plans? The reality is that student loan debt not only impacts millennials, but baby boomers too. The average college graduate holds $35,000 in loan debt when they graduate. This debt for graduates is the second largest liability on their household expenses, only second to mortgage or rent. Baby boomers are also impacted by this debt, as 35% of all loans are held by individuals over 40, and therefore affecting this generation to save for retirement.
There are many ways an employer can design these plans based on their financial goals and budgets, along with their employee population. These programs are robust and include financial counseling and modeling tools. Some employers are even considering matching programs. At the moment, employer contributions are taxable income to the employee, though there are currently bills in congress that would aim to make student loan repayments tax-free to the recipient.
There are several vendors that employers will have to choose from for student loan assistance plans. Tuition.IO and Gradifi are two examples. Employers will have to consider several factors when selecting a vendor like data security and system capabilities, design of plan and if they will offer a match. The average employer match currently ranges from $50 to $200 per month. This is applied to principal and reduces the number of years the borrower has to pay interest.
As with any employee benefits plan, this is a benefit that will continue to evolve and grow as the demand for it increases. It’s very hard to wrap your mind around saving for the future while you have a huge debt like student loans from your past. Stepping away from the traditional plans with only benefits that mainly focus on health and wellness, a benefit like student loan assistance recognizes that taking care of employees goes beyond just planning for the future or the unexpected, but rather helping them find a balance between planning ahead and keeping their head above water with student loans.