Student Loan Repayment Assistance: A Perk for the New Generation of Workers

Student Loan Repayment Assistance: A Perk for the New Generation of Workers By: Mathew BurrMBA, MHRIR, GPHR, SHRM-SCP, SPHR, CPHR

As the cost of college education continues to rise and more graduates are entering the workforce with excessive amounts of student loan debt, employer repayment assistance is becoming a new and slowly growing trend in the organizational perks industry. The rise in popularity as a new perk has been slow, but is quickly taking hold as the benefit for a new generation. While “only 3 percent of more than 450 surveyed companies offer student loan repayments programs as part of their benefit plans, according to the Society of Human Resource Management 2015 Employee Benefit Survey,” the number has increased to 8 percent in 2019, as shown above, doubling from 2018 to 2019.

A few of the surveyed organizations are paying amounts of between $100 to $250 per month toward current employees’ student loan debt, while others will contribute up to $10,000 toward student loans; a lump sum of $5,000 after five years, followed by annual $1,000 payments over the succeeding five years. As a working professional who has paid down student loan debt, any amount that an organization is willing to contribute is a valuable incentive to recruit and retain highly educated and high performing employees. A recent survey by lontuition, a student loan management platform, found that 80 percent of the 1,000 people surveyed wanted to work for a company that offers student loan repayment assistance. Paying off debt has more immediate benefits than, say, taking advantage of a company’s 401k plan.

Many employers are struggling with employee engagement and retaining talented individuals in their organizations. With millennials changing jobs on average every 2-3 years, the cost associated with turnover will continue to balloon. Offering student loan repayment assistance for these employees has the potential to reduce turnover, engage employees in the organization’s mission and vision, promote knowledge transfer from baby boomers to millennials, and develop longstanding relationships with employees and a new generation of organizational leaders.

A twist to student loan repayment assistance is student loan refinancing reductions. Instead of the lump sum, the employee has the option to refinance the student loan debt with the organization. Employers I have worked for in the past have offered reduced rates on vehicle refinancing and mortgage refinancing through company-sponsored credit unions. Why are we not offering the same benefit to recent graduates on student loan debt? This could be a tremendous strategic advantage in the war on talent and help organizations sustain and grow talent from within.

If student loan reimbursement or refinancing is not an option for your organization, consider offering budget training. Young professionals and recent graduates struggle with budgeting and do not know who, to ask. Consider adding an optional budgeting seminar or training as part of the new hire orientation. Include younger professionals in the annual budgeting process. This will assist them in obtaining knowledge and skills in the budgeting process. Another option to consider is a mentor program with the finance or accounting department. Develop a mentor system in which a newly hired graduate is paired with a seasoned finance or accounting professional; the system could entail discussions on budgeting and the organization’s financial systems. Not only would s/he develop a strong network in the workplace, it would add tremendous value from an employee-growth perspective.

Many organizations small or large offer employees an Employee Assistance Program (EAP) as a free perk to assist with many issues inside the workplace and outside of the workplace. As part of the EAP perk, should organizations consider offering student loan consolidation assistance? With two-thirds of students not understanding the terms of their student loans, interest rates or payment plans, do organizations need to develop this new form of EAP? The Student Loan Consolidation Assistance Program (SLCAP) could be designed and utilized just like an EAP program is; employees are welcome to utilize the program or not. Some EAP programs do offer financial assistance, but it should be tailored specifically to student loan assistance. I would not recommend partnering with a bank or selling a product. Just offer it to recent grads who might have questions or concerns about their current student debt load. This could be another niche perk that assists your organization in retaining and attracting young and skilled talent.

Certain states, and even Canada, have now begun offering to pay off student loan debt if you relocate to that area and obtain residency.

Below are relocation options, currently being offered or being developed throughout North America:

Rural Opportunity Zones consist of 77 counties in Kansas and offer tax waivers and/or a student loan payment program up to $15,000.

http://www.kansascommerce.com/index.aspx?NID=320

Niagara Falls, NY is developing a program that could save a student up to $7,000 in student loan debt.

Memphis, TN, is the first city government to offer a student loan program.

The 20th largest city in the country, Memphis will contribute $50 a month to the student loan account of any employee who’s worked for the city for at least a year.

Relocating to Saskatchewan, Canada, could save a student up to $20,000 in student loan debt if s/he graduated after 2010.

http://www.saskatchewan.ca/residents/education-and-learning/graduate-retention-program/about-the-graduate-retention-program

Alternative options to reducing the student loan debt burden include:

Working as a public-school teacher in a federally designed low-income secondary school or five years as a special education teacher at a federally designated low-income elementary or secondary school can reduce loan debt up to $17,500.

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/teacher#teacher-loan-forgiveness

Working at a federal, state or local government agency for 10 years, could eliminate the remainder of the debt balance.

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service

Work for the public good; social workers for families in low-income and high-risk areas, law enforcement and corrections officers, firefighters, emergency medical technicians, public defenders and nurses all have the opportunity to reduce or have all Perkins loans forgiven.

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/charts

Join the Peace Corps or AmeriCorps and you might qualify for 70% of your student loans to be forgiven.

http://www.peacecorps.gov/volunteer/learn/whyvol/during/loans/options/

The public sector has been progressive in its current programs to assist employees with managing and repaying student loan debt. There are great programs in the public sector and volunteer organizations that provide tremendous value to their employees in helping to eliminate or reduce the burdens associated with higher education. As organization leaders, we need to be aware of these programs and proactively manage the perks that will add the most value for our employees.

Debt is stressful. As we expect employees to do more with less, how much impact does worrying about student loans, paying the bills, living paycheck to paycheck have on an individual’s performance in the workplace? What impact does it have on the organization? These are questions we have to ask ourselves when thinking about employee engagement, recruitment and retention, business strategy, leadership development and managing the new generation. Are we offering the right perks? What else can we be doing to help our employees in and outside of the workplace?

There have been articles written about the extreme lengths students and graduates will go to eliminate student loan debt. I was in this category; I paid back almost $74,000 in student loan debt in 23 months. There is tremendous personal sacrifice and extreme budgeting when paying back that amount of money in a 23-month window. I negotiated a high salary upon leaving graduate school, set a goal and managed my budget relentlessly. As I work on a second graduate degree, I know that $100,000 in student debt is waiting for me in a few short years. A proactive approach to repayment and goal setting will help any graduate repay student loan debt.

As the $1.6 trillion student loan debt continues to rise, and with 50% of the workforce expected to be from the millennial generation by 2020, the popularity and increased use of the student loan repayment perk will continue to rise. The advantage of the aforementioned programs has yet to be determined, however; as a young professional who did pay student loan debt, my first choice would have been an organization that offered this perk.

As an organizational leader, ask yourself if a student loan repayment assistance perk will add value to your organization and your employees. Will it help recruit and retain top talent? Is a refinancing or assistance program a better option for our organization? Have we asked our current or future employees? Is it something we should ask at a college recruiting event? How do we implement such a program, and what effect will it have on our current workforce? Do we eliminate tuition reimbursement and substitute a student loan repayment assistance program in its place? Do we open offices or locations in area’s that offer students debt relief?

The perk is gaining in popularity and will have an impact on where and how long a talented young millennial will work and stay at an organization. A student loan debt repayment perk could replace benefits that have been in place for decades. Paying off student loan debt is something we all want. Organizations that have programs in place will have a tremendous strategic advantage as the workplace continues to evolve and change.

Reference material:
https://www.shrm.org/hrdisciplines/benefits/articles/pages/in-focus-student-loan-debt-repayment-hot-employer-benefit.

Mathew Burr

Matthew W. Burr has over 12years of experience working in the human resources field, starting his career as an industrial relations intern at Kennedy Valve Manufacturing, to most recently, founding and managing a human resource consulting company: Burr Consulting, LLC, and serving as a co-owner of Labor...

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