Posted January 15, 2019
College students and employees often take out student loans to help them get a good education, so they have the necessary knowledge and skills for jobs in their profession and can help their employer succeed. But the burden to repay these loans is overwhelming. With today’s student loan debt crisis and the competitive job market, many businesses are adopting new strategies to find and keep top talent, such as offering help with student loans. And while workers actively look for employers who will provide student loan repayment assistance, here are five other reasons employees love this benefit.
1. Alleviates stress
Employees with student loan debts say they borrowed the money because it was their only option. They needed a quality education to get the right job or get accepted into a graduate program. The Federal Reserve Bank reports that 44 million Americans owe a total of $1.5 trillion in student loans.
Employees worry about how to repay their student loans. They spend several hours at work thinking of strategies to cover their debts and daily living expenses. They may even take on a second job to help pay off their loans. They are highly stressed, which can impact their health and work productivity. Employers that offer student loan repayment assistance help ease employees’ stress so they’ll become more engaged with their work.
2. Allows enjoyment of life events
Often employees with student loan debts forego normal lifestyle experiences. Their monthly loan bill is about the cost of a home mortgage payment, so they put off purchasing a home or car, going on vacation or starting a family. With the student loan repayment benefit, employees can get out of debt sooner, so they can enjoy these big life events sooner.
3. Boosts morale
Employers who help employees repay their student loans have discovered an unexpected benefit: employees feel valued and appreciated, and they are more satisfied with their job. Employees want to work for businesses that are committed to them, and willing to invest in their personal and professional growth. An American Student Association study found that 86 percent of workers with student loans said they would commit to their employer for five years if they received assistance to pay off their debt.
4. Reduces fears
Not only are employees stressed about repaying their student loans, they are also fearful about the future. Research shows that 6.8 million student loan borrowers are between 40 and 49 years old, and owe on average $33,675 each. They’ve taken out loans to pursue graduate degrees, get additional training or to assist their kids with college expenses. Without payment assistance from their employers, workers could be making loan payments until they’re in their 50s.
5. Encourages savings and retirement planning
Only 66 percent of American adults are saving for retirement, financial experts report. One study found that just over half of Americans had only $10,000 set aside for retirement. This means that they’re losing years of retirement savings opportunities. For younger workers, that could be at least 10 years of savings. Employees with student loans report that after making their monthly payment and covering basic living needs, minimal funds are left for retirement savings.
If employers help repay student loans, employees can reduce the length of their loan and can start saving for retirement and other future expenses.
How employers can provide student loan repayment assistance with Employee Choice
A study by Boston College’s Center for Retirement Research found that college graduates with student loan debts accumulate 50 percent fewer retirement savings in their 401(k) by age 30 than those without loans. Each year, employees leave $24 billion in 401(k) matching funds from their employers on the table.
Through the BenefitEd Employee Choice program, employers can provide equitable benefits for all employees. And they don’t have to adjust their budgets because they can use the funds they’ve already set aside for matching contributions.
Employees can make full use of their employers’ matching programs by applying these unused dollars to help pay down student loan debt. Or, employees can split the matching funds to make a payment to their student loan debt and put money away for retirement. The Society for Human Resource Management reports that 92 percent of employees with student loans would take advantage of an employer contribution program similar to a 401(k) match.
And for employees who don’t have student loans, they can continue to use employer 401(k) matching funds for retirement savings.
Through BenefitEd, employers can also provide employees access to a college 525 savings plans to help them save money for their kids or grandkids’ college expenses.