In an earlier post, we discussed how companies are offering unique employee benefits to lure top talent. Let’s dig deeper into one of the more attractive employee benefits—student loan assistance.
Why is this important?
Student loan assistance, which started as a niche benefit by a handful of companies across the U.S., is finding its way into mainstream offerings of workplace benefits. It’s emerging as a new and very important benefit. According to Reuters, seven in ten college graduates have student loan debt. The average person leaves school $30,000 in the hole, while nearly 20 percent owe more than $100,000. Americans are now more burdened by education loans than they are by credit card or auto debt. More than 400 companies nationally are administering education debt benefits to their employees, and this continues to grow.
For many companies trying to lure and retain candidates, now that unemployment is at an 18-year low, student loan repayment programs offer a way to specifically target millennial workers who are saddled with student debt. For employers, this benefit is highly desirable and may sway candidates in their decision-making process. It’s good to advertise this benefit as well by posting it within the job description and on social media sites such as LinkedIn, Facebook and the company “blog.” However, be mindful that if you are going to make this offering available to attract new talent, you may want to incorporate this for current employees that still have college debt by offering a lesser percentage of repayment or by offering 100 percent reimbursement for those looking to obtain a master’s degree (which also promotes higher education and skill sets that can be applied to your company).
How it works.
The way this benefit works is employers make a regular contribution to the loan balance, typically $100-$150 a month, while employees continue to make their regular payments. Employees save money on both the balance and the interest they would have paid on a longer loan term. Unlike tuition reimbursement benefits, which are tax-free below a certain amount, the employer’s loan contributions are considered taxable income. So, on a $26,500 student loan with 4 percent interest, an employer’s help of $100 a month could cut down the length of a 10-year loan by about three years, saving employees around $10,000, according to Reuters. Other companies access how much of a loan is left for an incoming candidate and offer to pay off the loan provided the employee guarantees a certain length of employment with the company. This cuts down on turnover, as well as increased productivity for the company.
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