According to recent figures from the Federal Reserve, about 45 million people in the United States are in student loan debt, totaling over $ 1.6 trillion during the first quarter of 2020. In addition, 69% of all bachelor’s graduates in 2019 left school with debt, as are 54% of master’s degree holders and 47% of doctoral graduates. These loans can put stress on people in good times, but this stress is only magnified in times of crisis.
Fortunately, Congress passed the CARES Act in March to help fill some of the shortfall Americans face. One of the provisions included in the bill concerns employer contributions to the repayment of employee student debt, extending the pre-tax treatment of employer contributions up to $ 5,250 per employee per year for include contributions to eligible student loans.
According to Federal Reserve statistics, the average monthly student loan payment is $ 393. “Benefits like these can make all the difference for employees,” says Alex Dontoh, professor of accounting at the Stern School of Business at New York University. “A monthly loan payment of $ 393 is quite a large sum considering that the average pre-tax salary of a college graduate in the United States is around $ 50,000. The student loan situation was dire before, but it has gotten much, much worse with the COVID-19 pandemic. “
How do you know if a student loan repayment program is something your organization should be considering? Below are five reasons why a student loan repayment program can be an innovative and valuable part of your benefit package.
1) Student Loan Repayment Benefits Can Help Employers Level the Game
The statistics are clear: student debt disproportionately affects women and minorities, who not only take more loans, but tend to have higher balances. By providing all employees with access to student loan repayment programs, those with higher debt levels may feel the support of additional payments while those with lower debt levels may end up falling behind. repay their loans sooner. Plus, a student loan repayment program can help both groups meet other goals such as home ownership or retirement savings.
“Since women and employees from underrepresented minorities have higher student loan debt, establishing or expanding existing student loan repayment plans would provide them with proportionately more benefits than ‘other demographic groups,’ says Dontoh.
2) The advantage helps organizations meet multigenerational needs
The student debt burden is a multigenerational problem. The average student debt of Gen X is $ 39,584. Baby boomers and millennia are not far behind this total with an average of $ 34,703 and $ 33,000, respectively. Employers can offer student loan repayment benefits without worrying that it will benefit one generation rather than another, helping them attract job applicants at all levels.
adds Kate Winget, head of Gradifi by E * TRADE, a leader in the student loan industry.
3) Providing employees with student loan repayment programs offers employers a way to keep them happier in their role and extend their tenure
According to the Society for Human Resource Management (SHRM), only 8% of employers offered student loan repayment benefits to their employees in 2018, but research shows such programs are in high demand. A study found that 78% of employees say they would like their employers to offer the benefit to. Another study linked job tenure to the availability of student loan repayment programs, with 86% of employees saying they would stay for five years if their employer offered them such advantages. Employee demand (and debt levels) may increase as employees seek to improve their skills and competitiveness following the mitigation of the COVID-19 crisis.
4) tackling one of the biggest sources of financial stress can contribute to employee productivity
Many studies link student debt to reduced employee productivity. Researchers say this prevents employees from doing their jobs and inhibits their ability to concentrate. According to American Student Assistance’s to study, 22% of stressed employees cannot complete daily tasks and 24% have difficult relationships with their colleagues. A student loan repayment program can alleviate some of that stress.
Marty Gervasi, director of human resources at Hartford Financial Services Group, says their implementation of a student loan repayment program was tied to their workforce goals of reducing employee stress. “The growing cost of student debt continues to concern the country and our employees. ” he explains. “It’s a financial burden that can cause a lot of stress, and we want to help employees have more financial flexibility, allowing them to focus on their lives and careers. “
5) Student loan repayment programs help businesses demonstrate the value they place in their employees
Employees want to be proud of where they work. Discovery surveys finds that employees who take pride in their business are more engaged in their work and will stay in the organization longer. This is why a student loan repayment program can help tip the balance for wanted employees who carry the burden of student loan debt. Plus, even employees who have no debt may decide to stay in their jobs just because they like their employer to support those with student debt.
Michael Fenlon, US personnel manager at PwC, says this is the case in his organization. “Even employees without student debt tell us they are proud of this innovative benefit. They are proud that the firm is tackling such a complex and important issue in our society, especially one that they believe negatively affects their own friends, family and colleagues.
To learn more about how your organization can implement an employee student loan repayment program, visit www.gradifi.com.
The E * TRADE Financial family of companies provides financial services, including trading, investing, banking, and management of employee stock and benefit plans for financial well-being.
E * TRADE Financial Corporate Services, Inc. recently acquired Gradifi, Inc. Gradifi provides solution-oriented financial wellness benefits for employers to provide their employees with student loans and college savings benefits.
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