More Employers Are Introducing a Rewarding Way to Tackle Student Loans
The average American has $38,000 in student loan debt. This financial strain doesn’t just affect personal finances—it ripples into the workplace. This debt impacts employees' stress and ability to manage day-to-day expenses: 66% of those with student loan debt say the rising cost of inflation coupled with their student loan payments makes it hard to make ends meet.
Student loan debt isn’t just a young employee problem; 2.2 million people over the age of 55 have student loan debt. Employees across all ages and generations report that student loan debt impacts their ability to save for retirement, with many employees choosing to focus on paying down debt before contributing to retirement accounts.
Employers are noticing: 78% of employers say their workers are financially stressed. And, from an HR perspective, financial stress among employees is a major concern with 40% of employees saying their financial stress impacts their career decisions. Studies have shown that employees with significant debt are more likely to feel distracted, experience burnout, and even seek higher-paying jobs elsewhere.
Many companies are choosing to offer student loan repayment benefits as a way to attract and retain top talent. Does it make sense (cents!) for your company to offer this benefit? Below, we’ll explore how employers can help employees reduce the financial burden of student loan debt for their employees, and whether this benefit makes sense for your org.
The Business Case for Student Loan Debt Repayment Perks
Student loan debt repayment is a valuable tool in improving employee retention. While it may not be an initiative every employer needs to implement, perks like student loan repayment assistance can be a valuable part of an employee’s total compensation package and make a real difference in reducing their financial stress.
Here are some reasons they matter to employees.
- Employees want them. Our recent compensation trends report found that student loan assistance is one of the top additional benefits employees wish their company offered—9% of respondents even said they would take a pay cut for this perk.
- They help employees get out of debt faster. Morgan Stanley estimates that employers contributing just $100 per month toward student loans can help employees become debt-free three years earlier than those without assistance.
- Retention and satisfaction improve. That same Morgan Stanely survey shows that 70% of employees are more likely to stay at a company that offers student loan benefits.
Here are some ways companies are approaching student loan debt repayment perks:
- The Secure 2.0 program allows employers to match student loan payments with 401(k) contributions—helping employees pay off debt while still saving for retirement.
- One company offers a 5% 401(k) match if employees contribute 2% of their salary toward student loan payments.
- The IRS now allows employers to use educational assistance programs (originally meant for tuition reimbursement) to help employees pay off existing student loans.
Currently, only about 9% of employers offer assistance to employees with their student loan debt, but that number is expected to grow. The bottom line: implementing a program around student loan debt can positively impact your employees and company culture.
How to Launch a Student Loan Repayment Program
What does it take to set up this perk at your company? We’ve gathered our best ideas on getting started.
Gauge Employee Interest
First, explore if your team is interested in student loan repayment support. You can do this a number of different ways:
- Direct, one-time survey: Ask employees what perks would matter most to them. Make sure the survey is anonymous so employees feel free to give their honest opinions.
- Understand demographics: Millennial and Gen Z employees report that student loans are big concerns for them. If your employee population has employees in these demographic groups, this perk could be more impactful.
- eNPS: Conducting regular eNPS® surveys can help your organization understand overall employee engagement and see if there are changes or shifts in employee satisfaction.
Define Your Strategy
Be sure to calculate the overall investment to the organization. While not every employee may take you up on student loan repayment benefits, a program like this needs to be available to all who are eligible. Calculate the total ongoing costs to make sure this kind of program is sustainable.
If it makes sense to offer support with student loan repayment as part of your compensation planning, then you need to decide on your fiscal strategy. Here are some ideas of ways you could structure this perk:
- Flat monthly contributions: You could commit to a fixed monthly payment (e.g., $100–$200) toward an employee’s student loans, helping them chip away at their debt more quickly.
- Lump-sum payments: Some companies offer a one-time or annual contribution of up to $5,250 each year (for example: $5,000 upon hire or $2,000 annually for up to five years) as a retention incentive.
- 401(k) student loan match programs: You could deploy a program based on Secure 2.0 where you allow employees to direct funds toward loan repayment while still receiving an employer match to their retirement plan.
- Tiered or tenure-based benefits: As a way to boost retention, your company could structure this perk so you offer increasing repayment assistance based on tenure, rewarding long-term employees with greater loan support.
Understand the Legal and Tax Implications
The IRS allows employers to contribute up to $5,250 per employee per year tax-free under certain educational assistance programs. Depending on how you structure this perk, contributions beyond this limit may be taxable.
Be smart about tax implications and be sure to consult with tax professionals or legal experts to navigate these regulations and explore tax credits that may apply.
Get Outside Resources
Look at what other companies are doing and how they’re structuring their perks programs. BambooHR regularly releases reports that can help you understand trends in the workplace, like what perks matter to HR leaders and employees across industry verticals.
You could also connect with a financial partner or benefits broker to look at how to deploy specific repayment programs for your employees. Finding partners like this can help your company ensure the payments are going directly to loan providers.
Communicate Regularly About Benefits
You need transparency and clear guidelines to ensure employees understand and take full advantage of your benefits programs. Make sure you’re regularly communicating about all benefits, including a student loan repayment program if you choose to deploy one, at every stage of employment—hiring, onboarding, and throughout their tenure.
Then track how employees are using this initiative and other benefits so you can continually refine your perks to best match employee needs.
Revealing What Matters: How the Right Benefits Drive Retention
As organizations continue to compete for top talent, offering student loan repayment benefits is a meaningful way to stand out. It is one way your company can alleviate financial stress for employees while fostering loyalty, productivity, and overall job satisfaction.
It won’t make sense for every company to offer this benefit. But it’s important HR leaders are regularly getting feedback from employees on what they want and need from your company to increase their job satisfaction.
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