When it comes to financial responsibilities, few things are as daunting as repaying student loans.
Did you know that as of July 2018 there is $1.5 trillion in total U.S. student loan debt? To put that number into perspective, $1.5 trillion can cover a year’s salary for over 20 million teachers. Plus, student loans are now the second-largest category of household debt in America, trailing only behind mortgages.
The largest generation in the workforce is struggling
Millennials and Generation Z are in the midst of understanding their repayment structure and plan, which is likely overwhelming and causing anxiety on some level given that those numbers are no small thing. A PwC survey found that 40 percent of Millennial employees have a student loan, and over 80 percent of them say their student loans have a moderate or significant impact on their ability to meet other financial goals.
Due to stagnant wage growth, hikes in rental costs, and mounting debt burdens, Millennials in particular can’t even afford to leave the homes’ of their Baby Boomer parents. According to Federal Reserve Chairman Jerome Powell, “you do stand to see longer-term negative effects on people who can’t pay off their student loans…as this goes on and as student loans continue to grow and become larger and larger, then it absolutely could hold back growth.”
Federal statistics show that a typical 2017 college graduate owes about $39,400 in student loans, and borrowers ages 20 to 30 are making average payments of $351 a month to service their loans. That’s a significant chunk of change for young professionals starting out in their careers and looking to make any major financial investments.
Choosing student debt repayment over healthcare
According to an Oliver Wyman 2017 survey of employees, when asked what they would want if their boss offered to put $200 a month toward benefits a whopping 45 percent said they would want that money to be put towards paying off student loans. In comparison, only 29 percent wanted that money put towards retirement and 17 percent said they would want help paying for health insurance.
Employers have the opportunity to aid this younger demographic with meeting their financial goals – and one key way is through student loan contribution programs such as matching contributions, making direct payments and providing access to more resources.
Following summer internships and leading into a fresh recruitment cycle in the fall, I urge you to consider student loan contribution as a recruitment and retention policy – especially for the younger generation in your workforce. John Samaan, Senior Vice President and Head of Human Resources at Millennium Trust Company, began offering a student loan financial service with amazing results – 20 percent of the company’s 300 employees enrolled. “We got a lot more inquiries from potential candidates,” Samaan said. “People want to join us to be able to participate in this program.”
The number of employers offering student loan benefits is small, but that number is expected to increase in the coming years with a number of recent bills seeking to make this kind of assistance tax free for companies. Big names such as Starbucks and Verizon have expressed interest and support for this measure.
Infuse more empathy in your organization
Our 2018 State of Workplace Empathy Study found that 92 percent of all employees say student loan assistance demonstrates an organization is empathetic towards employees. With 9 out of 10 employees reporting they are more likely to stay with an empathetic employer, student loan contributions can be a powerful tool for attracting and retaining top talent.
Here are two prime examples of why student loan contribution programs are valuable for your organization:
- Recruitment: If a candidate has offers to two different organizations with exact same pay, benefits and work perks, but one offers student loan repayment and the other doesn’t, it’s an easy decision to opt for the one that will help them pay off a portion of debt.
- Retention: When an employee hears their friend is getting employer help with their student loans, and your organization isn’t offering that benefit, it could perk up their ears for new jobs.
These are simple examples – and feel obvious – but yet only 1 in 10 employers with over 40,000 employees offer a third-party repayment assistance program. You could be the head of the pack when it comes to attracting, and keeping, top talent.
So, what’s the bottom line? Your younger workforce is feeling the financial strain of student loans, and as a tactic to keep that talent and invest in your organization’s future, you should consider offering student loan contribution programs.
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