More Companies Offering Help With Student Loans as a Recruiting Tool, Reveals Survey
Financial assistance to pay off student loan debt is a hot emerging employee benefit, according to a recent survey by IonTuition. The firm provides web-based software to businesses and colleges and universities to help students manage tuition debt.
In March, IonTuition surveyed 412 individuals who influenced hiring decisions within their companies. Respondents were asked about their companies and student loan repayment assistance programs, by which an employer makes a contribution towards repaying an employee’s existing student loan debt as an employee benefit.
Eight percent reported that their companies offered such a benefit. The 2016 Employee Benefits Survey from the Society for Human Resource Management found that 4 percent of businesses now offer loan repayment assistance as an employee benefit, up from 3 percent in the 2015 SHRM survey.
Although this particular benefit is not yet widespread, interest is growing rapidly among employers, according to IonTuition and Tuition.io, which helps employers structure loan repayment assistance programs.
Benefit could become a recruiting advantage
Shann Grewal, IonTuition’s director of operations, says companies face a highly competitive market to recruit top talent, and loan repayment assistance helps companies attract, retain, and engage employees over the long term.
Brendon McQueen, Tuition.io’s founder and CEO, says among millennials, the average job tenure is just 16 months. Among the reasons younger workers don’t stay around is they move to a new job with a slightly higher salary simply to help pay off college loans.
Grewal noted that legislation pending in both the U.S. Senate and House of Representatives seeks to modify the existing Employer Education Assistance Program to allow companies to contribute pre-tax earnings to help workers repay undergraduate and graduate student loans in the same way they are currently allowed to help employees finance continuing education.
The Employer Participation in Refinancing Act allows employees to receive up to $5,250 per year tax-exempt to reduce the cost of their loans, the same amount they are currently allowed to receive tax-free from their employers to finance continuing education. The bills also allow employees, provided they have good credit, to refinance college loans at lower interest while still receiving many of the same protections provided by federal loans. The bills permit businesses to deduct loan repayment subsidies in the same way they deduct financing continuing education expenses.
Adoption rates rising among employees
Employee adoption rates for their employer’s continuing education subsidies range between 2 and 4 percent, according to McQueen. But the employee adoption rate among the businesses using Tuition.io’s student loan repayment program is 20 percent.
“Employers aren’t waiting for tax advantages to offer this benefit,” McQueen emphasizes. He said employers using his loan repayment assistance program provide a monthly subsidy between $100 and $200.
Both Grewal and McQueen say there are 40 million Americans with student loan debt, bringing the total U.S. student debt burden to more than $1.3 trillion. Seven out of 10 college graduates have accumulated an average of $35,000 in student loan debt.
Grewal points out that college debt prevents many employees from participating in their companies’ 401k retirement programs. “Student loan debt is higher than auto loans or credit cards,” he said.
And the IonTuition survey found that more than 90 percent of businesses responding to the survey recognize that student loan debt creates stress for employees. Approximately 80 percent believe this financial stress negatively affects worker productivity.
Nearly all respondents believe employees with student loans would take advantage of this benefit, and that such a benefit would improve employees’ morale, productivity and general well-being, while providing the company with a talent recruitment and retention advantage. Respondents also believe employees would appreciate the convenience making their student loan payment via payroll deductions.
“Prepaying student loans offers a guaranteed return on your education investment,” McQueen says.