When it comes to the fact that paying for college is getting harder, the statistics speak for themselves. Since 1971, the average cost of a college education has increased by 1300 percent, far outpacing inflation or wage growth. That means more students have had to take out larger loans to pay for school, and the result is a toll taken on the workforce: 56 percent of young workers suffer from debt-related anxiety.
It's not just Millennials who are in trouble, either; according to the Federal Reserve, of the $1.48 trillion Americans have racked up in student loan debt, $450 billion belongs to those age 40 and over—thanks either to their own loans or to borrowing for their children.
It comes as no small relief, then, that some employers are starting to incorporate help with student loans into their traditional benefits packages. Our team has pulled together the most common questions about student loan benefits, and how to answer them.
What Are Student Loan Benefits?
Companies helping their employees pay for school isn't a new thing—organizations have long been offering tuition reimbursement for workers who want to continue their educations. A 2015 study conducted by the International Federation of Employee Benefit Plans found that 83 percent of companies offer some form of the benefit.
What is changing in the face of the growing student debt crisis, though, is that employers are now helping their employees deal with the debt they've accrued before they ever started working.
What Do Student Loan Benefits Involve?
CommonBond and other young organizations are helping disrupt employee benefits by working with employers to institute tools that directly alleviate student loan debt. These can include:
- Employer contribution: Employers can make monthly contributions to employees' outstanding student loan balances, usually in the form of a $100/month payment. Not only can this in-demand benefit save employees thousands of dollars and years of stress when it comes to paying off their loans, but it helps companies attract and retain top talent.
- Evaluation: Employees receive access to an evaluation tool to help them figure out the best ways to pay their loans back, regardless of their income or credit. As borrowers with federal loans are automatically enrolled in a standard repayment plan, many have never explored the other options available to them. The evaluation tool also helps employees determine a payment plan based on their savings, which allows them to free up money for other expenses.
- Refinancing: Companies can offer their employees the opportunity to refinance their student loans, which means a provider will replace an employee's existing loans with a new, single loan, often at a lower interest rate. This may be preferable to loan consolidation, which simply gives borrowers an interest rate based on the average of those of their existing loans.
- Low-interest rate student loans: Employers can make new loans available to employees, whether they need them to continue their own educations or they're taking them out to help family members pay for school.
Together, these tools attempt to alleviate one of the main burdens put on today's workforce, and in doing so, improve company culture at a variety of forward-thinking organizations.
How Do Student Loan Benefits Help Employees?
There's no question that having these benefits available makes a world of difference to employees who have been carrying student loan debt for years or even decades. In a survey conducted by Student Loan Hero, a plurality of Millennials (39 percent) said that "too much debt" was the financial issue that caused them the most stress.
Repayment and debt evaluation benefits can help lower the anxiety of employees with student loan debt, while a program that offers new loans at competitive rates will assuage the worries of employees looking to continue their own educations or help finance those of their children. Effectively, any serious attempt at easing this burden is sure to make employees happier and healthier.
The rewards that come from student loan benefits can also help employees invest in other key areas of their financial well-being—be it retirement savings or buying a home. Those same employees will also have an easier time taking out new loans if they owe less on their outstanding ones. That will surely come as a relief to would-be mortgagees, given that student loan debt is delaying homeownership among Millennials by an average of seven years.
There's also a sense of satisfaction that comes with working for a company that cares and is forward-thinking. When PricewaterhouseCoopers launched its own student loan repayment program in 2015, Chief People Officer Mike Fenlon expected that employees without debt would be upset by the institution of a system that wasn't geared toward them. Instead, as Fenlon told the Society of Human Resource Management, he was pleasantly surprised when employees who did not take advantage of it said they were "proud of the pioneering benefit."
How Do Student Loan Benefits Help Employers?
Beyond providing a benefit that directly helps alleviate the burden of student debt, companies that put such programs into place will also attract the most qualified applicants. A 2015 American Student Assistance survey reported that 76 percent of jobseekers cited student loan repayment as an important factor in their consideration of a position, putting companies that offer that benefit in high demand. Furthermore, students with advanced degrees typically carry the greatest debt, meaning that they'll likely be most swayed by help in this area.
Student loan benefits don't just help find qualified employees, they help keep them— which is important, given a Gallup report that Millennial job turnover accounts for approximately $30.5 billion per year. Companies offering student loan repayment can set up plans where the amount they contribute increases over time or can even defer those benefits until a certain point, thereby incentivizing long tenures among employees and dissuading them from looking for work elsewhere.
Finally, the same anxiety that plagues employees with student debt can impact their performance in the office. According to a 2017 Bank of America Merrill Lynch Workplace Benefits Report, 53 percent of Americans have said that stress over money has negatively affected their performances at their jobs. That's a staggering number, but proof positive that student loan benefits are in everyone's best interest. As more companies begin to implement such offerings, this number and others will surely change for the better.