Graduation season is upon us. The majority of college graduates entering the workforce are saddled with debt. With the job market close to full employment, business owners would do well to consider offering a particularly attractive benefit to appeal to recent graduates: student loan repayment.
This type of program is a unique, highly-valued and sought-after benefit. Over 70% of college graduates have student loan debt, while only 4% of companies offered the benefit as recently as last year. According to American Student Assistance, 86% of young workers surveyed said they would commit to an employer for 5 years if the company helped pay back their student loans. These workers indicated that student loan debt negatively affects their health, their focus and, longer term, their retirement planning. Over 60% indicated that their priority is paying off student loans and not contributing to a 401(k) or other retirement plan.
While very attractive, this type of program may cause issues if not handled properly. Since it helps only employees with current student loan debt, not those who’ve already worked hard to pay off their debt or never had any in the first place, it could be viewed as unfair. It would also be considered taxable income to the recipient.
As an alternative, the employer concerned about benefit parity could offer monthly or yearly educational stipends. These could be used to pay down student loans. For those without that debt, the stipend could be used for seminars and continuing-education classes.
Employers have some leeway on how to offer the benefit. For starters, the amount of the benefit can be $50 to 100 (or less) per month. As little as $100 per month can shave a couple of years off the loan repayment period! The amount can be capped or tied to an employee match. An employer may also require a waiting period before the benefit starts.
Given the tight labor market, and the over $1.4 trillion in student loan debt, employers looking for an enticing benefit to attract and keep new talent may want to consider a student loan repayment benefit.
For more information on benefits and other HR topics, check out HR Support Center.
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