Posted on: October 31, 2024
Interest in student loan repayment benefits continues to grow. Employers realize that helping employees repay their student loans eases employees’ financial stress. It also can be a competitive advantage in a hot labor market and helps employers retain top talent. Consider four ways a student loan repayment product benefits employees and employers.
1. Reduce stress and improve attitudes.
Employees with student loan debts spend considerable time thinking about how to pay off their loans and cover other necessary living expenses. Financial stress can cause anxiety and depression that makes it difficult to focus on being productive at work.
As this LinkedIn article points out, student loan debts create extra stress because they last for decades and can’t be discharged in bankruptcy like other debt. This long-term stress can also impact physical health issues.
When employees receive employer assistance in repaying their student loans, it eases the burden of their financial commitment. As workers pay off their student loans, they’re in a better position to focus on improving their financial security by putting money aside for retirement savings.
Employers are the beneficiaries of happier and healthier employees who are better able to focus on their work.
2. Increase loyalty and lower turnover.
Employees who receive help from their employers in repaying student loans appreciate the investment made to reduce their financial burden. They feel valued and appreciated. One study found that about 86 percent of employees with student loans said they would commit to their employer for five years if they received repayment assistance.
Employers may enjoy the blessing of higher employee retention and lower turnover. Recruitment experts report that the average cost to replace an employee can range from one-half to two times the employee’s annual salary. A reduction in turnover allows an employer to invest the savings in growing the business or providing development opportunities to employees.
3. Improve engagement and retention.
Prospective job applicants are actively looking for employers who provide student loan repayment assistance. And employers offering a student loan repayment benefit are discovering the unexpected advantage of an increased pool of talented, diversified workers.
Student loan debt is a long-term commitment, with some payment plan options for undergraduate student loans spanning two decades and the payoff for those who have pursued graduate degrees taking at least that long. Receiving assistance with student loans from an employer can greatly reduce the length of the loan commitment, causing many to stay with employers for several years.
If employers help repay student loans, employees can reduce the length of their loan and can start saving for retirement and other future expenses.
4. Achieve other goals by incentivizing employees.
Employers face unique workplace challenges. Having differentiated benefits that can incentivize employees may help them overcome those challenges and achieve their goals.
For example, Thriveworks, a nationwide mental health provider of therapy and psychiatry offering in-person and online therapy, had tried offering various benefits to incentivize their part-time clinicians to increase their hours to full-time, with limited success. Working with BenefitEd to offer Employer-Assisted Student Loan Repayment to full-time employees finally helped move the needle on achieving their goal, while relieving financial stress for employees. The employer’s help with paying down their student loans was a great incentive, with 35% to 40% clinician participation.
You and your employees win with BenefitEd.
Many employers think they cannot afford to help employees repay their student loans. But they can.
Research showed 17% of workers with access to an employer-sponsored plan don’t contribute—and of those who do, 12% leave company matching funds on the table. With Employer Match, employers can choose to 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 401(k) 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. And for employees who don’t have student loans, they can continue to use employer 401(k) matching funds for retirement savings.
With SECURE Act 2.0, which builds on the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, employers can also recognize employees’ student loan payments as qualifying contributions to their 401(k) for purposes of receiving matching dollars. While this doesn’t cost you anything—and doesn’t help employees lower their balance faster—it does help them take advantage of their matching dollars and often start saving toward retirement earlier.
Interested in learning more?
Discover how to put BenefitEd’s Employer-Assisted Student Loan Repayment or Employee Match products to work for your employees or let our experts help you put provisions of SECURE Act 2.0 in place. Contact us today.