Youâ€™ve done the research, made the pitch to leadership, and received their seal of approval for a student loan repayment program as your new employee benefit. Nice work! Every generation of the workforce, from Millennials to baby boomers, is impacted by student debt. By helping your employees get out from underneath their loans, you are providing a benefit that will last them a lifetime.
As you head toward your student loan benefit launch date, follow these tried-and-true best practices to ensure your program is most successful.
Step 1 â€” Start with the basics
Goals, budget, and long-term outcomes are essential to building any benefit program, including a student loan repayment benefit. You may have a general idea of your goals, but now itâ€™s time to make them more concrete. Here are the two questions you should start with:
- Are you only interested in attracting and retaining talent through this program? If so, then solely focusing on helping employees by making an additional monthly payment to their student loans may be the right solution for your company.
- Is your team also interested in overall employee financial wellness? If the answer to this is yes, then be sure to include student loan guidance and support as part of your program. This ensures your employees can also take steps to better manage their loans and save even more money by doing so.
Defining your goals from the start will help shape a program that is tailored to your organizationâ€™s needs. The goals you choose will determine your offerings (more on that in a minute).
Step 2 â€” Gather (more) data
Since youâ€™ve been researching student loan assistance, you probably already know that 44 million Americans are weighed down with $1.48 trillion in student debt. But how many of those individuals are at your company and how can you help them best? CommonBond for Businessâ„¢ often performs student debt organizational assessments for our customers. This is the most precise way to identify the total number of your employees with student debt and how much they collectively owe. This assessment enables you to accurately calculate the cost to roll out a student loan repayment program at your organization.
Leveraging industry averages and publicly available information are also helpful ways to gather data, but they canâ€™t provide an accurate picture of your specific employee demographics. Another less effective approach involves conducting a brief employee survey to get a pulse on demand for the benefit. The downside to a survey is that you will only be able to base your decision on those who respond, and not any employees who choose not to participate.
Step 3 â€” Define employee eligibility
The next step is deciding who can participate. Here are some of the most common approaches companies take to eligibility:
- All Employees â€” Making the benefit available to all employees with student loans (vs. new hires, hard-to-fill positions, or recent graduates) ensures you can better market this benefit. This will also position your company as an employer of choice committed to employee financial wellness.
- New Hires or Hard-to-Fill Roles â€” If you are solving a talent attraction issue or have a limited budget, narrowing this program to new hires or hard-to-fill roles is a way to work within specific parameters. From a talent attraction standpoint, a student loan repayment program can be significantly more impactful and lower risk to an employer than other benefits. Unlike with signing or annual bonuses, if an employee would choose to leave after a month, you have only made one payment to their loans.
Step 4 â€” Understand Payment Options
Payment options serve as the heart of most student loan assistance programs. Here are the most important items to consider alongside your budget for your repayment benefit:
- Monthly payments â€” Monthly payments are great for keeping the student loan assistance benefit top of mind and can help with employee retention.
- Annual payments, quarterly payments, or "spot bonuses" â€” These more infrequent payments are an option, but they are not nearly as effective for addressing retention challenges. Predictably, regular payments have the most impact.
Thereâ€™s a lot of flexibility with payment amounts. Most commonly, employers start with a $100-a-month contribution which could save an employee as much as $11,000 and reduce their payment timeline by two years (assuming a 10-year loan that has a 6% interest rate). If retention is your focus, a "graduated" or "tenure-based" program allows employers to increase payments with the employee's tenure. This provides a strong incentive for employees to stay with a company and limits the initial budget required by an employer up front. An example of this type of payment option would be:
- Year 1: $50/month
- Year 2: $75/month
- Year 3: $100/month
- Year 4: $125/month
Incorporating a program cap is a useful way to ensure your organization remains within budget. A cap sets an upper limit on how much an employer will contribute to any one employeeâ€™s student loans. When an employee reaches the ceiling, they mature out of the program.
Keep in mind that if you are going to build a cap, you must take employeesâ€™ average tenure length into account. For example if you have a turnover issue between years two and three, then you may consider putting a cap in place after year four, when your data shows turnover is no longer an issue.
Using all the information you have gathered from these four steps will help you create a solid framework that will guide conversations internally and with potential benefit providers to build a tailored student loan repayment program. You can now approach the process with confidence knowing that when done right, a student loan repayment benefit program can reap long-term benefits for your company and your employeesâ€™ well being for years to come.