Feb 12, 2020 | Tom Anderson
Are Student Loan Repayments Right for Your Benefits Package?
U.S. borrowers have nearly $1.6 trillion in student loans with an average balance of more than $37,000. Student loans are the second-largest category of consumer debt in America after mortgages.
t’s no surprise that 9 out of 10 recent college students with debt were looking for a company that provides a student loan repayment benefit, according to a survey by medical device maker Abbott, which started its own program in 2018.
Abbott is not alone. A diverse group of employers from Hulu to Estee Lauder to Staples are adding student loan repayment programs to their benefits menu.
But, are student loan repayment benefits a good fit for your employees? Take these three steps before launching your own program.
Survey Employees to Determine Need
Student loan repayment benefits usually appeal more to younger workers than established employees. Yet, every workforce has its own nuances that will affect demand and enrollment. HR professionals should understand the dynamics of their organizations when it comes to student loans.
“We typically see an adoption rate of 20-30% of an employee population, but recommend employers run a survey to get a sense of how many employees have student loans and would be likely to participate,” says Gregory Poulin, co-founder and CEO of Goodly, which provides student loan repayment benefits.
Survey data can help you assess if and how you want to design a student loan repayment program. Examine your company demographics to ensure you’re not offering a nice perk for a few individuals, but disenfranchising another large portion of your employee base, says Jeffrey Rouse, senior human resources consultant at strategic HR inc.
Design a Benefit That Suits Your Workforce
The most common student loan repayment benefit involves payments of $100 per month, with a total limit of $10,000 per employee.
“Under current law, this assistance is taxable income to the employee,” says Mark Kantrowitz, publisher and vice president of research at SavingforCollege.com. “But there is a lot of pressure on Congress to change that.”
You don’t have to wait for Congress to act to build a program that suits your workforce. Poulin recommends that a flat monthly repayment benefit of $50 to $100 works best for recruiting new hires. However, if the goal of the program is retention, you may be better off with tier contributions based on employee tenure, he says.
Communicate How It Works and Track Results
It’s early days for student loan repayment benefits. That means HR leaders need to devote more time to launching the perk than other standard employer offerings.
“Clearly communicate the program to employees with employee information sessions to introduce staff to student loan repayment, how the program design works and how to enroll in the program,” Goodly’s Poulin says.
The novelty of student loan repayment benefits also requires HR departments to gauge the program’s effectiveness. “The data is still not in yet,” Rouse says. “But one would think that it would be a pretty big attractor, at least from what I'm hearing anecdotally when I'm talking to clients.” HR should assess the impact of the benefit program on recruitment and retention to ensure that it adds value.