According to the U.S. Census Bureau, only a third of employees who have access to a retirement program are actively using it to save for their future. Many either don’t see the benefit at this stage in their lives or they simply can’t afford to contribute until they have paid off their student debt.
So, it’s not that the plans aren’t effective, it’s that they’re not addressing employees’ specific financial needs. Your employees want financial benefits that address their current lives. By taking a different approach, offering employees benefits more relevant to their own needs, employers can make a bigger impact in both adoption rates and employee engagement.
Student loan debt is an acknowledged problem, particularly for the most recent college graduates you may be employing. U.S. student loan debt now stands at to $1.52 trillion, making it the second largest form of consumer debt behind only mortgages. The average borrower from the Class of 2017 graduated with $28,288 in debt, an increase from $27,975 for the average Class of 2016.
But it can also be an issue for members of your staff who are saddled with children’s student loan debt, or want to help their children or grandchildren save for college, or simply someone who needs help figuring out the best way to pay for college.
How You Can Help
Personal financial benefits have gained popularity in recent years and Student Loan Assistance can be a useful, attractive addition. And there are several ways you can offer assistance:
- Direct financial assistance to pay off existing loans (this can help employees pay down loans as much as 30 percent faster – even $100 a month will make an enormous difference)
- Help in refinancing loans
- Tuition assistance to get further degrees
- Combine assistance with loan repayment aid
- Contributing to a 529 education plan
- Debt financial information and counseling
- Access to a student loan refinancing platform that allows employees to shop among different lenders
An association of total rewards professions conducted a survey that discovered that 4 percent of employers were providing loan repayment assistance; 8 percent of companies with 40,000 or more employees were going that route.
Those aren’t very impressive numbers, but the Consumer Financial Protection Bureau, a federal consumer protection agency, predicts that loan repayment programs could grow quickly as employers begin to see the value of offering financial wellbeing benefits to their employees.
Keep in mind that student loan repayment benefits don’t receive preferential tax treatment. Any amount paid to employees will be subject to income and payroll taxes. Congress is considering legislation that would add student loan repayment to a section of the Internal Revenue Code (which allows employee benefits to be paid with pretax dollars), but there is no clear indication that this will move forward.
But even without preferential tax treatment, student loan repayment benefits can be key to attracting and retaining top talent. They are relatively easy to implement. And many of the vendors that support tuition reimbursement programs can help you set up and administer loan repayment benefits.
A Few Key Tips
Whatever you choose to do, here are some things you should consider:
- Start slow and grow the program – Maybe test the waters with a basic, low level program to gauge participation and interest. If you’re doing direct payment assistance, start with $50 a month and eventually raise the amount if you see that the program is working.
- Keep it simple – Make it as easy as possible for employees to use.
- Share accountability with employees – They need to continue making their normal payments. Your contribution simply speeds up the payback.
- Make sure to communicate the program clearly and often – The more employees understand about what the program can do for them and exactly how it works, the more participation you’re bound to get.
Some employees spend half the time they’re at work feeling stressed about financial and personal issues. As employers rethink benefits plans, providing targeted guidance and resources will not only create happier and healthier employees, it can actually help your bottom line.
To learn more, contact your local Marsh & McLennan Agency representative or Voluntary Benefits Consultant Kyleen Engelstad.