Most people graduate from college with high expectations and a great plan for the future until the reality of their student loan debt hits. The search for a job becomes less about career satisfaction and more about the money. Dreams come to a pause as the focus shifts to clearing the debt.
This scenario does not just apply to a few cases. Statistics show that forty-five million Americans carry the $1.56 trillion student loan debt in the country, and these numbers continue to rise.
Student loan debt does not just affect the graduates, but it affects the economy as well. High levels of debt discourage people from investing, venturing into entrepreneurship, owning homes, and saving. With most money going towards debt repayment, graduates hardly manage to have any assets.
Companies have, in recent times, begun contributing towards the end of this crisis. They are introducing employee benefits aimed at assisting workers to pay off their student loan debt. They achieve this with the help of companies such as Gradifi and Tuition.io that specialize in helping companies enact their student loan repayment benefits.
Although the employees benefit most from these loan repayment assistance programs, the employers gain as well.
Why Companies Offer Loan Repayment Assistance
Let’s look at three reasons why companies are willing to spend money on employees’ loan repayments.
1) It offers a competitive advantage
Millennials take the largest percentage of the workforce and yet are heavily affected by student loan debt. For this reason, most people in this generation will be keen on checking the capability of a job’s remuneration package in making debt repayment easier and faster, before accepting a job offer.
Companies that offer student loan repayment assistance are thus more attractive to job seekers enabling the companies to hire the best skills in their respective field.
2) It boosts productivity
Employees who are under financial strain due to their student loan are less productive in the workplace. They are almost always stressed out by their inability to save for retirement or buy a home.
Companies that offer peace of mind through loan repayment programs or easy installment loan like this website, therefore, do not just work with the best in the field, but they motivate them to deliver to their fullest potential.
3) Prevents high turnover
An employee will always look for the employer who benefits them the most, and with the high level of debt in most households, assistance with student debt repayment is a juicy deal.
Employers who offer this benefit experience less labor turnover and hence use less money on recruitment. Eighty-six percent of employees are likely to stay with an employer for five years if they helped with their student loan.
The quality of the labor force a business has plays a vital role in its overall performance. Companies are, therefore introducing student loan repayment benefits in unique ways.
Here is a look at six strategies employers are using.
Student Loan Refinancing
Most people choose to refinance their student’s loan, which enables them to save some money and reduce their monthly payments. Refinancing only offers benefits when the new loan is at a lower interest rate than your student loan.
Credit Suisse decided to help its employees with their student loans after realizing that it affected their participation in the retirement program. Being a financial services company, it makes sense for the company to guide their employees towards achieving financial freedom.
It has come to an agreement with Social Finance Inc., which is an online lender, to offer an additional 0.25% interest rate reduction on top of their already reduced rates, to the bank’s employees who choose to use Social Finance Inc. to refinance their student loans.
Unused Vacation day’s Wages Tradeoff
If you have had student debt, you understand how stressful it is, and any extra money that goes towards it makes a huge difference.
Unum allows its employees to forego up to five of their 28 paid vacation days in exchange for cash that goes to paying off their student debt. The insurance company uses the employee’s hourly rate to calculate the worth of each vacation day worked.
Research by the Tennessee-based company on their US employees revealed that approximately 30% are burdened by student loan that either they, themselves carry or their children.
By giving them a practical solution to increase their contribution towards the loan repayment, the employees become more productive
Matching Loan Program
The high level of student loan debt is not just keeping college graduates from saving for retirement, making investments, and buying homes. It is also discouraging people from pursuing other degrees, which can make them more productive in their careers.
Besides increasing its minimum base hourly wage for its workers, Aetna, a health care company, has developed a program that helps its employees tackle their student loan debt with ease. They match their full-time and part-time employees’ annual student loan repayment up to $2000 and $1,000 respectively, with a lifetime maximum of $10,000 and $5,000 respectively.
The program applies to anyone who has earned a graduate or undergraduate degree from an accredited university within three years of applying for the matching loan payment program.
Aetna also reimburses its full time and part-time employees 80% of the approved expenses incurred when pursuing job-related courses.
One of the main problems graduates with student loan debt face is the inability to save for retirement. Crippled by the debt, most people forego contributing to their retirement fund and instead channel the money to the student loan.
Companies such as Abbott Laboratories have come up with an exciting solution. For all part-time and full-time employees eligible for the 401(k), Abbott deposits an amount equivalent to a five percent match to their 401(k) account in a program known as Freedom 2 Save.
It is done under the condition that the employee pays two percent of their salary towards their student loan through a direct payroll deduction. The employees receive the 401(k) match without making any contribution.
The program enables Abbott’s employees to concentrate on clearing their debt while the company takes care of securing their retirement.
Student Loan Pay Down
If you thought that only millennials are affected by the menace that is student loan debt, you are wrong. Seniors are struggling to clear their loans too. Over 2.8 million Americans of sixty years and above carry student debt.
No one desires to retire in debt. And yet while managing only to meet their minimum student loan debt, most people will not just retire in student debt, but die in it as well.
Penguin Random House offers a student loan assistance benefit to their employees that makes it possible to clear the debt faster. The company, through Gradifi, directly pays up to $1,200 of their employees’ student loan annually, to a maximum of $9,000. The employee has to have worked in the company for one year to be eligible for the benefit.
The amount of $100 paid monthly covers the employee’s principal reducing their repayment period.
Use of Company Stock
Considering that employers benefit from the education their employees possess which they acquired using student’s loans, it is only fair that they offer a hand in clearing these loans. It is with this understanding that Chegg, an American education technology company, is helping its employee’s clear their debts.
In addition to a $1,000 annual cash payment that employees with student loan receive, the company is offering stock to help with the payment of their student debt. For employees who have been with the company for at least two years, those in entry and managerial level qualify for up to $5,000 annually in company stock while those in senior levels receive $3,000 annually.
Chegg sells the stock on behalf of the employee’s and the proceeds after the tax goes to Tuition.io, which takes care of remitting the amount to the respective source.
The burden of student loan debt does not just affect the graduate involved, but employers as well. When stress and distractions compromise the productivity of the employees, the profitability of the company is affected as well.
Companies have opened their eyes to this ripple effect and are taking measures to curb it. They are taking steps to help reduce the student loan burden through direct cash payments, reimbursements, and juicy incentives such as retirement benefits.
Although only 4% of employers are currently offering student loan repayment assistance, other companies are catching on.
With the existence of these unique programs and more expected to emerge, the future is bright, and student loan debt may cease to be a nightmare for many graduates and a threat to the economy.