Student Loan Aid Improves Millennial Retention, Managers Say
Adoption rate of loan repayment benefits still low, despite much attention
By Stephen Miller, CEBS 6/30/2016 - SHRM
Although employers that help repay their workersf student loans report that
it boosts morale and productivity—and that this aid is especially valued by
Millennials—only 4 percent of Society for Human Resource Management (SHRM)
members say that their organizations offered this benefit in 2016.
There are 40 million Americans with student loan debt, bringing the total
U.S. student debt burden to more than $1.3 trillion, the federal government
estimates. Employers are taking notice, and loan-repayment aid is most likely to
be offered by businesses facing difficulty in recruiting employees with
in-demand skills, whether that be nurses, financial analysts or software
designers, and by those that want to differentiate themselves as attractive to
recent graduates and younger workers.
But despite much media attention, SHRMfs 2016
Employee Benefits report, released June 20, shows that among SHRM
members only 4 percent of organizations offer student-debt repayment assistance,
up from 3 percent in 2015.
gEmployer-provided loan repayment assistance is still relatively new and it
can be a high-cost benefit for employers. But this benefit could see future
growth given high rates of student loan debt,h said Evren Esen, director of
SHRM's survey programs. gIt is especially attractive to younger workers with
highly valued skills.h
Attracting Millennials
In separate survey findings released in June, IonTuition, a
provider of web-based student loan management tools, asked managers who
influenced hiring decisions at their companies to share their perspective on
student loan repayment assistance.
Nearly all of the 412 managers who responded said that employees with student
loans would take advantage of this benefit and that the benefit would improve
employee morale, productivity and general well-being while providing the company
with a talent recruitment and retention advantage.
Managers also believe that Millennials, the generation with the most student
loan debt, value student loan benefits more than previous generations.
gThe market for these services is growing and shows no signs of being
temporary,h according to an IonTuition white paper that highlighted the following
survey findings:
• Stress
test. More than 90 percent of managers said that student loan debt
creates stress for employees. Approximately 80 percent believe this financial
stress decreases employee productivity.
• Attract
and retain. Nearly 80 percent believe offering a student loan repayment
program would support talent recruitment. Also, 70 percent believe that offering
such a program would improve employee retention and morale.
• Plan
for the future. Nearly 75 percent think that employees contribute less
money to their 401(k) because of their student loans. Nearly 85 percent stated
that employees would enjoy the option of making their student loan payments via
automatic payroll deductions.
On average 53 percent of companies that provide student loan assistance
benefits contribute more than $1,000 per year toward each enrolled employeefs
student loan debt, while 16 percent contributed less than $500.
Four Loan Assistance
Approaches
Four approaches have emerged regarding how to provide student loan
assistance, noted Samuel A. Henson, vice president and director of
legislative and regulatory affairs at Lockton, a national insurance
brokerage, in a June 2016 online post. These are the:
• Education
approach—Providing simple, straightforward educational employee
counseling, both in person and online. These services are relatively low
cost and easy to implement but require engaged employees.
• Attraction
approach—Offering sign-on bonuses in the form of student loan
payoffs. Employers using solely this approach may miss opportunities with
tenured employees.
• Retention
approach—Rather than a sign-on bonus, offering periodic student
loan payments for employees who complete service requirements. Payments
extend years after hire, creating a retention incentive.
• 401(k)
approach—Some vendorsf programs work in conjunction with employer
401(k) plans. Employees make student loan payments via payroll deductions
that are matched by their employer in the form of pretax plan
contributions. But this strategy may be problematic from a compliance
perspective. For instance, employers would need to amend existing 401(k)
plan documents, and a contribution provided to a select group may require
testing requirements that the plan otherwise could avoid. (For another
view on mixing student loan payments with matched 401(k)
contributions, see SHRM Onlinefs article gA
Student Loan Repayment Benefit with a Twist.h)
gStudent loan debt is not just an employee problem,h Henson noted. gThe
impact on employeesf personal well-being, their performance on the job,
and their retirement readiness is significant, and it is all felt by their
employers.h |
Stephen Miller, CEBS, is
an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.