Posted January 27, 2021
Student loan repayment assistance is a benefit in high demand. About 45 million employees have student loan debts. Collectively they owe more than $1.64 trillion. The burden of these debts cause many workers to look for employers who will help them pay off their loans. Read on to learn four ways a student loan repayment benefit supports business growth.
Many employers that are interested in helping employees with student loans have hesitated, mainly because of tax liabilities. However, due to the CARES Act and the 2021 stimulus package, employers can make up to $5,250 in tax-free payments to each employee with student loans. This tax-incentive should last at least five years. The contribution goes directly to the loan’s principal vs. accumulated interest or late fees. Employees greatly appreciate their employers’ loan payment assistance. Even a small donation can help them pay off their loan sooner. Here’s more about how it can help your business.
Losing employees can affect a business’ bottom line. When an employee leaves, customer relationships can be damaged. This happens if details about an order are missed, or if the customer experience is not as expected. And, if other employees are expected to pick up the work while a new person is hired, they may become burned out and unhappy. If the position isn’t filled quickly, these employees may look for a different job.
There also are the costs of hiring and training a new team member. Often it takes six months before a new employee is fully engaged with their work. Business experts say that the cost of replacing an employee is between 90% to 200% of the position’s annual salary, depending on the job level and competition. About 63% of employers say that keeping talented workers is more challenging than finding them.
Employees of all ages with student loan debts are actively looking for employers who will help them pay off these loans. In fact, 86 percent of employees would commit to a company for five years if the company offered a student loan repayment benefit.
Improves performance, productivity
Employees with student loans may be distracted at work, because of the financial stress they’re under. And unfortunately, these distractions can impact their performance.
Employees may be consumed with worry about how to pay all of their bills. They wonder how they’ll stretch their monthly salary to cover a student loan payment, necessary living expenses, and a mortgage or car payment. Plus, they don’t have any extra funds set aside to handle unexpected costs, like a car repair, accident or medical need. This makes it hard to relax and get to sleep at night. Many employees wake up during the night stressing over money. Then they’re sleep deprived the next day, which reduces work performance and productivity.
Financial stress can impact employees in other ways, too. About 22% of stressed employees struggle to finish tasks, and 24% have relationship problems with other team members. Employers who offer help with student loan payments benefit by reducing employees’ stress, so they are happier and more focused at work.
Reduces stress-related accidents
Research shows that 60% to 80% of workplace accidents are attributed to stress. Employees who are distracted over finances may not focus on details and have an accident.
Aon Hewitt reports that 89% of employers plan to implement or expand financial well-being programs to help stressed employees. A student loan repayment benefit is a critical financial well-being program that can significantly enhance employees’ lives.
A student loan repayment benefit helps ease employees’ financial burdens. For example, if their student loan payments were reduced by $150 a month, 84% would save the money for an emergency, a house, retirement, or a child’s college education. In addition, 52% would use the money to pay other debts.
Workers who receive a student loan repayment benefit appreciate their employers’ investment. In fact, four of five employees would feel more positive about their employer. And about 80% of employees would feel more loyal. Employees who appreciate their employer are more grateful and engaged at work. They also tend to stay longer.