For today’s employees, record levels of student loan debt has become a major source of financial stress, frequently displacing more traditional concerns over how to afford a home or support an expanding family. In fact, a PricewaterhouseCoopers (PwC) Employee Financial Wellness Survey found that nearly four out of five millennial workers believe their student loan repayment burden has pushed other financial goals further out of reach.
And, unfortunately, those worries don’t simply dissipate when an employee walks in the office door.
Here are some of the many ways your workers’ student loan debt may be affecting your business every single day, along with tips for how you can orient your company around a solutions-driven approach:
- Attracting top talent: According to payroll servicing provider ADP, younger workers may factor in their exorbitant monthly student loan payments when negotiating salaries — a concern that they will likely prioritize to a greater and greater degree as they move past that first job and secure a more stable foothold in the job market.
- Retaining promising employees: High levels of student loan debt could tempt young employees — who may tend to job-hop more often than older counterparts — to leave your company for higher salaries or switch to firms that offer loan repayment benefits. Research by the recruiting firm Recruitifi suggests more than a third of millennials would be willing to switch jobs for a pay increase. Makes sense, considering that the average 20- to 30-year-old pays $351 per month in student loans.
- Keeping workers mentally and physically healthy: Financial stress — including student loan debt overload — can take a toll on employees’ mental and physical wellness. Which may not only increase their utilization of your company’s health insurance, notes the Society for Human Resources Management (SHRM), but also potentially add to the number of sick/vacation days employees take as a result.
- Maintaining employee engagement: Stress can also reduce an employee’s ability to focus on the work at hand. In fact, more than half of workers with student loans — double the number of other employees — say they routinely lose work time due to financial worries, according to PwC.
- Encouraging participation in other workplace benefit plans: An American Student Assistance (ASA) survey found that the majority (62%) of employees who have student loans say they’ve put off investing for retirement. And employees who struggle to keep up with student loan payments are also less likely than their loan-free counterparts to participate in other workplace programs such as 401(k) matching plans, reports a study by Aon Hewitt, which also found that 51% of employees who have student loans contribute no more than 5% of their pay to their workplace retirement plan.
What Employers Can Do to Decrease Student Loan Stress
Because so many clear links between student loans and workplace success exist, many employers now offer loan-repayment options as an employee benefit.
Here is some practical, actionable advice for companies considering establishing a similar perk:
- Encourage retention: SHRM suggests tying student loan repayment benefits to company loyalty. A firm could offer a $5,000 student loan repayment benefit to employees after five years with the company, for example, and an additional $1,000 per year for the following five years, rewarding devoted employees while simultaneously spreading out the employer’s financial commitment over multiple years.
- Help with student loan refinancing: Employers can help workers connect with providers that offer private loan refinancing at attractive rates. Some companies may even choose to help subsidize employees’ loan refinancing efforts, SHRM adds.
In the future, proposed federal legislation could eventually allow both employers and employees to receive tax breaks for workplace student loan reimbursements up to certain financial limits. Were such a policy to come to pass, student loan-related benefits could potentially become even more popular than at present.
A good argument, perhaps, for getting ahead of the curve and embracing tomorrow’s standard benefit today — before your competitors.