On the hunt for an innovative way to invest in your human capital assets, improve employee morale and engage with the workforce?
Providing the highly sought-after perk of student debt relief to your employees may fit the bill—especially when one considers the fact that three-quarters of graduates enter the workforce with student loans averaging more than $35,000.
Organizations that can help this contingent get over what is most likely the greatest financial hurdle of their young lives are often able to attract and retain the best available talent. In fact, after implementing a student loan pay down plan companies typically see an improvement in employee attraction, retention and even referrals.
The following primer is designed to help you determine whether student loan repayment is right for your company, what type of setup can meet the needs of your workforce and how you can stay within your benefits budget while still meeting larger organizational goals for ROI and performance.
Identifying the Need
Just as there are no standard solutions when it comes to other benefits such as health care and retirement, there is no one-size-fits-all solution when providing student loan repayment assistance to staff. Instead, organizations need to work with employees and HR teams to create the right program.
Begin with the basics:
1) Send out a survey. Your first step in determining how big the student loan debt problem is for employees at your company is to craft a survey that provides detailed information about the types of debt held, the amount of student loan debt affecting employees, etc. Benefit providers like Gradifi can help your organization create and execute an effective employee survey to this end.
2) Conduct an impact and budget analysis. Once you have survey results to review, work with a company to analyze the impact you can make on your employees’ debts over time. Gaining a big picture view of how employer-sponsored debt contributions decrease individual employees’ debt payoff periods can often produce astonishing probabilities.
What are Your Company’s Goals?
Every company has its own talent priorities that will guide their decision-making process on the road to adopting a student loan repayment program.
Below are a few of the key goals organizations work towards when providing student loan repayment assistance as an employee benefit.
1) Attract new talent
One of the primary reasons employers love student loan repayment programs is because it can help them stand out in a competitive, crowded job market. For organizations prioritizing their employer brand as they seek new talent, it is not recommended to include a waiting period before the benefit goes into effect for new employees. In fact, providing a one-time contribution bonus to new recruits allows organizations to advertise a greater impact on Day One in job postings and recruitment materials.
While employers typically have a waiting period for other benefits such as 401(k) contributions and health plans, those seeking to attract new talent should consider the merits of using this perk as a way to get top talent in the door.
2) Retain valuable employees
There is often a measurable return on investment when it comes to student loan repayment programs—namely, lowering turnover and recruitment costs. Organizations that prioritize keeping existing staff happy might find value in adopting a step contribution plan that rewards loyalty by increasing the benefit amount following each year of employment. Organizations hiring students in seasonal industries can even design programs to encourage student employees to return after each school year by increasing their contribution amount every season they return.
3) Engage with current workforce
As a result of massive student loan debt, a generation of highly motivated and highly skilled employees are putting off buying homes and saving for retirement. Helping those employees alleviate such a significant financial burden can not only improve employee engagement but also have a significant positive impact on your employees’ quality of life—which can contribute immensely toward the goal of a more productive workforce. The contribution employees receive is a monthly reminder that their employer cares about their financial well-being. Providers such as Gradifi even send out monthly reminders to employees after each contribution is made, reinforcing how their employer cares about their financial and mental wellbeing.
Types of Programs
The information gathered on employee needs can help determine the type of program that will have the greatest impact. Here are a few of the most popular program types to consider:
1) Fixed contribution
Long considered a standard amongst employers, a fixed-contribution program requires organizations to set a dollar amount and payment schedule. Organizations typically make monthly contributions but also have the option of submitting payments quarterly or monthly. To account for full-time and part-time employee groups, employers can also set up multiple programs with different contribution rates and schedules.
Example: An organization can choose to provide full-time employees with a contribution of $100 per month until a lifetime cap of $9,000 is reached, while also providing part-time employees with a contribution of $75 per month until they’ve reached a lifetime cap of $6,750.
2) Step contribution
A step contribution program is often considered ideal for organizations that want to reward employee loyalty at a higher premium after each year of tenure. Unlike the fixed contribution program—which keeps a consistent monthly contribution through the duration of the program—a step contribution plan allows employers to increase the contribution amount over time.
Example: Employees can choose to provide a $100 monthly contribution during an employee’s first year on the job, then increase that amount to $125 the following year, $150 the year after, etc.
3) One-time contribution
Unlike fixed and step contributions, the one-time contribution is a single payment that can be made to one or all employees at any time. Organizations typically utilize the one-time contribution as they would a bonus, often in conjunction with other plan types.
Example: An employer may provide a one-time contribution of $1,000 to employees that reach their fifth year on a fixed or step contribution plan. Employers also use the one-time contribution as a recruitment, performance or even referral bonus.
Other Things to Consider
If you’ve decided that a student loan repayment program has the potential to be a gamechanger for your company, consider leveraging the Gradifi team’s expertise in developing the best program for your company’s unique situation and goals.
No matter the program type, eligibility criteria or specific details that play into your potential student loan repayment program, it’s worth considering for those seeking ROI and flexibility in your benefits budget.