A Deep Dive Into Student Loan Repayment Assistance Benefits

Justin Held, CEBS
July 16, 2019 - IFEBP

Workers are becoming increasingly burdened by growing student loan debt balances, which by some estimates have reached an average of $28,650 per graduate. According to the new International Foundation study Education Benefits: 2019 Survey Results, employers are recognizing this burden and taking action. A small proportion of responding organizations is offering to pay down portions of workersf loans to retain productive workers and attract new candidates. Below are some key takeaways from our survey about this new educational benefit that is drawing significant attention.

Student Loan Repayment Assistance Offerings

• Four percent of responding organizations already offer some sort of student loan repayment assistance benefit. Also, 1.6% of respondents are currently in the process of implementing a loan repayment program, and an additional 22.6% are considering implementing a program.

• Organization size plays a role in the ability to offer loan repayment programs. Large employers (9.3%) are much more likely to offer loan repayment assistance than small (1.7%) and midsized (3.7%) organizations.
• In addition, large employers are more likely than both small and midsized organizations to consider adding a program.
• Employers located in the Northeast are more likely than those in other regions to offer a student loan repayment assistance program.

Considering/Implementing Student Loan Repayment Assistance Offerings

Respondents that are considering or are in the process of implementing a student loan repayment assistance program were asked about their motivations for offering a program

• Organizations that are considering/implementing are doing so to attract future talent (89.4%), retain current employees (69.1%), and maintain/increase employee satisfaction and loyalty (67.0%).
• Organizations are also doing so to keep current with evolving skill sets required for organizational success (22.9%) and to maintain/increase innovation (16.5%).
• In examining responses by organization size, respondents from large employers are more likely to consider offering these benefits to maintain/increase the productivity of their workforces.

Potential Barriers/Challenges to Offering Repayment Benefits

Respondents were also asked about some of the potential barriers and challenges they are facing in implementing or considering programs.

• Some potential barriers and challenges to implementing a student loan repayment program include cost (48.9%), uncertainty/complexity of implementation (31.4%), and potential resentment among workers who have already paid off loans (29.8%) or have ineligible loan debt (25.0%).
• Employers are also concerned about potential turnover after repayment requirements have been met (25.0%) and tax issues (21.3%).
• In looking at organization location, employers in the Northeast and West are more likely to cite difficulty in determining eligible workers/candidates as a barrier/challenge.
• In addition, employers in the Midwest are more likely to cite a longer tenured employee population as a barrier to offering these benefits.
• Employers located in the Northeast are more likely than those in other regions to cite the uncertainty/complexity of implementation as a barrier.
• Looking at organization size, respondents from smaller firms were more likely than those from midsized and large firms to cite little management support as a potential barrier to offering repayment benefits.

Additional Insights From Those Offering Student Loan Repayment Programs

Finally, those organizations that are currently offering student loan repayment assistance benefits were asked a number of questions about their programs. Due to the small number of organizations offering this benefit, the International Foundation cautions against drawing broad conclusions from their responses. However, below are a number of key findings that were gleaned from their responses.

• An overwhelming majority of respondents that offer student loan repayment benefits offers them to full-time salaried and hourly employees. A smaller proportion extends the benefits to part-time workers.
• Those offering these benefits repay loans related to a broad array of coursework, most commonly associate degree, undergraduate-level and graduate-level courses.
• Most organizations that have a loan repayment program have had one for two years or less.
• Most organizations that offer such a program have specific length-of-service requirements. Other common limitations include fixed annual dollar levels for repayment and restricting repayment to loans that led to a degree.
• A small proportion of respondents that have a student loan repayment assistance program has a payback requirement if the employee leaves the organization.
• The majority of organizations that offer repayment benefits process their payments through an external vendor as opposed to doing so internally.
• Those organizations offering student loan repayment assistance benefits most often do so to attract future talent, retain current workers, and maintain/increase employee satisfaction and loyalty.
• A large majority of respondents that offer these programs rates them as successful. To gauge success, they are tracking engagement measures, retention rates, utilization rates and recruitment rates.
• Some common barriers/challenges to the implementation of student loan repayment assistance programs include difficulty in determining program return on investment, resentment among workers who have ineligible loan debt and communication challenges.
• As part of their program communications, program sponsors often target recent graduates and those seeking entry-level positions.
• Several proposals have been introduced that would allow organizations to redirect funding from retirement or paid-time-off/vacation account contributions to student loan assistance. In general, organizations are considering these approaches going forward.