In previous generations, employers commonly offered retirement benefits as a way to attract the best and brightest employees. Much of the latest generation to enter the workforce, however, has more pressing financial burdens to consider.

Though many of their parents and grandparents could more easily afford the cost of higher education, the average American student now graduates with significant student debt — and with an average student loan balance of approximately $35,000 incurred upon graduation, it’s no surprise that a 401(k) contribution is often far from the top of a debt-saddled graduate’s financial priority list.

In response, many forward-thinking employers now provide student loan repayment as a perk — not unlike flexible working options and unlimited vacation. The response they’ve received is significant, given that graduates take on this often-hefty student loan debt to gain marketable skills, which is, of course, to the benefit of their future employer.

Will offering student loan repayment as a workplace benefit be the next big employer brand differentiator?

The evidence suggests it very well could be: according to a recent report by Fast Company, 80% of employees with student debt said that they wanted to work for a company that offered repayment assistance, and nearly half would prefer their employer contribute to reducing their debt than providing a 401(k) retirement plan.

It’s not difficult to understand why: As a recent CNBC report noted, the average cost of tuition and fees required to attend a non-profit, four-year university during the 1971-72 school year cost the equivalent of $1,832 in today’s dollars. Last year, the average cost for one year of the same education was $31,231. The cost of attending four-year public schools has similarly skyrocketed from less than $500 in today’s dollars in the 1971 school year to $9,139 this year. Meanwhile, according to the Bureau of Labor Statistics the Consumer Price Index for college tuition and fees increased 63% in the previous decade, compared with an average increase of 21% across all other items tracked in the Index.

Even those students fortunate enough to enjoy a slower pace of tuition inflation at their school of choice were not immune to related rising costs: Consumer prices for textbooks increased by 88% in the last decade, while non-board housing for college students increased by 51%.

Earlier this year the Atlantic found the amount paid in miscellaneous fees by students is exploding as well — charges ranging from “counselling fees” to “lab fees” to “professional development fees” popping up on college invoices nationwide add an additional $2,100 to the cost of higher education for the average student annually.

Though it may seem like a small expense compared with other common workplace perks centered around healthcare or retirement, student loan repayment actually has the ability to make a much more powerful impact. By providing debt-saddled employees with a monthly contribution of a few hundred dollars or a specific percentage paid toward their overall student loan debt, employers can potentially reduce a graduate’s principal and interest by more than $10,000 and slice two to three years off the life of their loan.

Early adopters such as Pricewaterhouse Coopers and Penguin Random House — as well as the financial technology startups they’ve partnered with, such as Boston-based Gradifi — will likely reap benefits competitors may not should student loan repayment become the new standard. After all, a quick browse through news archives reveals countless stories about the first organizations to provide flexible working hours, unlimited vacation and paid parental leave, though little fanfare remains for organizations that implement such perks later on.

Organizations seeking to win highly skilled employees in highly competitive job categories naturally work to secure recognition for the degree to which they invest in their employees. Simply put, establishing a student loan repayment plan now, while it is still considered innovative and cutting edge, is good for employees, good for perception in the wider marketplace and good for growing a talented workforce.



This article is not intended to constitute tax, financial or legal advice.We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained here.  Readers should consult their own attorneys or other tax or financial advisors to understand the tax, financial and legal consequences of any strategies mentioned in this article.