Student loan debt repayment assistance might be the perfect perk that employers should offer if they want to attract today’s top graduates and best talent.
Bloomberg referred to student debt repayment as the “hot, new company benefit,” and employers that offer it have begun to realize that this perk is a powerful way to differentiate themselves from the competition while also showing that they care about their employees’ well-being.
Crushing student loan debt ($1.3 trillion in the United States) has been known to contribute to increased financial stress and health risks of employees and decreased productivity in the workplace.
According to the 2016 PWC Employee Financial Wellness Survey, 42 percent of Millennial employees have student loan debt and 79 percent of those with student loan debt believe that their debt will make it more difficult for them to meet their financial goals. The younger generation isn’t the only group with debt. Generation X (26%) and Baby Boomer (11%) employees have their share of it as well. Financial worries have been a distraction for 50 percent of workers with student loan debt, versus the 23 percent without student loan debt whose financial worries have been a distraction.
Financial stress can have a significant impact on the physical well-being of employees, causing memory lapses, increased adrenaline and cortisol for a persistent feeling of “fight-or-flight”, elevated heart rate and blood pressure and more (Choi, Community Development Investment Review). Chronic stress affects many systems of the body, including musculoskeletal, respiratory, cardiovascular, endocrine, nervous and even the reproductive systems, according to research from the American Psychological Association. This means that productivity takes a hit for those under student loan debt.
But how does student loan repayment assistance work? Employers contribute certain amounts to pay toward their employees’ student loans. For example, a company might contribute $100/month toward student loan repayment assistance for one employee. If the employee continues to make their own payments as well, the employee will be able to pay off their student loans sooner and without having to pay as much in interest. Student loan repayment assistance provides peace of mind for employees.
Natixis Global Asset Management surveyed their employees and discovered that debt played a huge role in deterring employees from enrolling in more traditional benefits, like retirement plans, and how much student loan debt caused anxiety for their workers.
A bill has been sent to Congress to amend the tax code that would make the first $5,250 of employer contributions toward student debt assistance tax deductible, but Natixis chose to begin offering student loan repayment assistance now rather than wait for the bill to officially pass. And it’s been paying off. Employees have been giving the company great feedback on how the benefit is helping them to pay down their student loans. The company intends to also use the perk to recruit more employees as their business grows.
Student loan repayment assistance can be a great component to a company’s approach to holistic well-being; yet many employers might not realize that this is an option or how it can benefit their company. Benefits brokers have the unique position of identifying this opportunity and helping employers alleviate one of the most pressing concerns affecting their employees.