Not that long ago, the way to attract millennial employees, especially in the tech world, was to offer free yoga classes, ping-pong tables and catered lunches. But, saddled with student debt that’s not going away, employees now want more than just superficial perks. They want help in the form of student loan benefits. And according to a recent study, 58% of millennials would prefer student loan refinancing benefits from employers over extra vacation days.
An essential benefit
Student loan debt can be an albatross, a big monthly bill that gets in the way of buying a house, taking a vacation, or saving for retirement. In fact, student loans are now the second-largest consumer debt category after home mortgages, with 60 percent of all college graduates nationwide owing nearly $1.5 trillion. Graduates of the class of 2016 owe, on average, about $37,000 in student loans, while the class of 2017 saw its average loan debt increase to $40,000.
Those graduates are now out in the workforce and more concerned than ever about their financial future. No wonder. It’s not easy to save money and achieve financial independence with the cloud of a student loan lurking in the background. Including student loan refinancing as part of a benefits package seems like a no-brainer, given that most employees have goals beyond just paying the bills. A 2018 survey reveals that 10% of employers in the U.S. currently offer student loan refinancing programs. By 2021, that number is predicted to jump to 35%.
With the unemployment rate hovering at 4 percent and as millennials become the biggest generation in the U.S. job market, student loan refinancing has moved beyond nice perk to integral benefit. Younger employees, concerned about the future, are increasingly demanding it, and employers are responding.
Advantages for everyone
From the employee’s perspective, the benefits of student loan refinancing are pretty clear.
- Lower interest rates. Some refinancing programs offer annual interest rates as low as 2%. This means greater savings, potentially up to thousands of dollars, for the borrower/employee.
- Simplification. The employee makes a single monthly loan payment, rather than multiple payments to various lenders.
- Lower monthly payments. Refinancing often allows the employee to extend the repayment period, and writing a smaller check every month can mean less stress on their finances.
- Save for retirement. Or a house. Or a new car. And pay down student loans at the same time. A study from the Center for Retirement Research at Boston College reveals that graduates with student loan debt accumulate less in 401(k) retirement wealth by age 30 than their debt-free colleagues.
What might not be as obvious is how much an employer profits from investing in and advocating for their employees’ financial health:
- Attract and retain. Helping employees manage their student loan debt adds value. Want to recruit the best and the brightest? Make sure to offer student loan refinancing as part of your overall financial wellness program. In an era where job-hopping is common, a student loan refinancing benefit can encourage your employees to stick around for the long haul.
- Low or no cost. There’s a student loan refinancing option that works for everyone’s bottom line. Choosing the right lending or refinancing partner is the first step. The growing number of options available to tailor a program to your company’s needs often come at no financial cost to you.
- Productive employees. Investing in your employees tells them that you care about their financial health and future, which boosts workplace morale. Few things are better for a company’s bottom line than happy, secure, productive employees.
It’s key to remember that student loan refinancing isn’t just a fleeting trend. By some accounts, it could wind up being a strong bargaining chip for potential hires in the not-too-distant future. Solutions like Gradifi Refi, which connects a network of lenders to company employees, are an ideal way to tackle and overcome student loan debt. Employees can take advantage of special offers through their employer, refinance their student loans and reduce their monthly payments. An added bonus? It costs the employer nothing. According to a recent survey, 35 percent of employers will offer student loan refinancing programs by 2021, up from 10 percent in 2018, and 34 percent will offer loan consolidation, up from 8 percent.
In addition to straight-up student loan refinancing, companies are increasingly offering broad financial wellness perks, such as one-on-one sit-downs with financial counselors to discuss student loan management, retirement plan advice, short and long-term savings goals, even help with budgeting and spending.
The big picture
It’s a competitive economy out there, and smart employers understand that helping current — and potential — employees achieve their financial goals, whether through student loan refinancing or other financial wellness benefits, isn’t a choice anymore.