Attracting new hires by offering competitive benefits is an age-old practice that business has been utilizing since the post-World War II era. Standard benefits include things like retirement plans, life insurance, and supplemental dental and vision plans. Today however, there is a new benefit emerging: student loan repayment.
While growing numbers of millennials are warming up to the idea of setting aside money for retirement, younger workers representing Gen Z are struggling to get jobs. Setting up a 401(k) plan means nothing to them at this point. So using a retirement plan as a benefit doesn’t necessarily work if a company is trying to recruit from among the iGeneration. Student loan repayment might be the golden ticket for some of them.
Any company looking to focus its recruiting efforts on recent college grads and workers under the age of 30 should consider it. Student loan repayment is a unique employee benefit that seems a perfect fix to one of the biggest hurdles the iGeneration faces as they begin looking for work.
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Weighed Down by Student Loans
A March 1 story published by Plan Advisor says that the total volume of student loan debt in America has now eclipsed $1.4 trillion. Of that total, some $75 billion is accounted for by loans taken out by parents on behalf of their kids. This translates into 72% of all U.S. workers saying they have outstanding student loans.
Even more surprising is that 59% of U.S. workers between the ages of 22 and 44 are paying student loans. Another 21% over the age of 45 are paying them as well. What does this suggest? That student loan repayment as an employee benefit would appeal to millennials and Gen Xers too.
The fact is that student debt continues to be a huge problem in America. If employers can help alleviate some of it through a benefit offered to their employees, they could be part of the solution to a problem they helped to create by demanding that new hires have college degrees.
How the Benefit Would Work
A student loan repayment benefit could be administered in much the same way as a retirement plan or health insurance coverage. Employers could use a combination of payroll deductions and employer contributions to get student loans paid off in a timely manner. How much employers contribute would depend on how much they could afford to spend on the benefit.
A company that uses a payroll processing vendor could set up the benefit through that vendor. For example, Dallas-based BenefitMall works with companies to both process online payroll and administer benefits. They could modify their payroll software to account for the student loan repayment, keeping track of withholding and employer contributions for reporting purposes.
Of course, companies would not be forced to utilize employee withholdings as part of the benefit. They could choose to pay the entire benefit at their own expense. The benefit would still be reported as part of an employee’s total compensation, but no withholdings would be necessary.
Keeping Employees Around
Plan Advisor says that more than 86% of employees saddled with student debt admitted a willingness to stay with their current employers if they were offered the new benefit. Some 41% said they would stay until their entire debt was paid off while 85% would commit to staying at least three years or more.
It is clear that a student loan repayment benefit is both a great recruiting tool and a way to keep current employees from jumping ship. Perhaps the time has come to include it alongside health insurance and retirement plans.