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 three ways a student loan repayment program benefits employees and employers.
1. Reduces stress, improves attitudes
Employees with student loan debts spend considerable time thinking about how to pay off their loans and cover other necessary living expenses. In a Mercer 2017 Inside Employees Minds survey, nearly 50 percent of employees with student loan debts said financial worries interfere with their productivity at work.
Employees say that receiving employer assistance in repaying their student loans 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. Increases loyalty, lowers 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 cost on average to replace an employee are about 20 percent of annual salary for mid-range positions, earning $30,000 to $50,000 a year. A reduction in turnover allows an employer to invest the savings in growing the business or providing development opportunities to employees.
3. Improves 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.
One Wisconsin Institute reports that college students who graduate with a bachelor’s degree on average take about 20 years to repay their student loans. For those who pursue graduate degrees, they can make payments on student loans for at least two decades. Receiving assistance with student loans 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.
Employers win with BenefitEd
Many employers think they cannot afford to help employees repay their student loans. But they can.
Each year employees leave $24 billion in 401(k) matching funds from their employers on the table. With Employee Choice, 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 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.
Interested in learning more?
Go online to https://www.youbenefited.com or contact one of our sales managers.