As a benefit to employees, “student loan repayments can help employees solve their financial problems and create goodwill for your business,” said Karen Gustin, executive vice president of Ameritas Group Dental and Eye Care in Lincoln, Neb.
According to the NerdWallet 2020 Household Debt Study, the average American household with student debt owes $ 57,520, she noted.
On September 30, the suspension of student loan repayments by the federal government ends, unless extended at the last minute. “It’s a big date for a lot of your employees,” Gustin said.
“Your younger employees aren’t impressed with the traditional financial benefits,” because it’s a long road to retirement for them, she noted. They are, however, looking for immediate financial support.
According to the 2020 Society for Human Resource Management (SHRM) Employee Benefits Survey, only 8% of employees contributed to employee student loans.
Gustin described the following forms of loan repayment benefits:
- Employee subsidized student loan repayment plans. An employer makes a regular contribution to employee student loans, sending contributions directly to the loan manager. The amount of the contribution is at the discretion of the employer and is most often $ 100 per month.
- Corresponding contributions. An employer makes a matching contribution equal to a percentage of the employee’s own contribution, similar to a 401 (k) match.
- A choice between the pension plan or the contribution to the student loan. Employees are allowed to choose between receiving an equivalent contribution to the 401 (k) plan or an equivalent contribution to a student loan from their employer. “The advantage for employers is that it doesn’t create a new budget item,” because it doesn’t cost the employer any, said Gustin.
Among vendors, look for systems with easy administration and a user-friendly platform for HR and employees, she said.
Other related benefits that employers can offer, noted Gustin, are:
- Student loan advice.
- Student loan refinancing assistance.
A multi-level approach
To focus on retention, some companies are using tiered student loan repayment programs that reward employees for their tenure, Gustin said, for example by offering:
- $ 50 per month for one year of service with the company.
- $ 100 per month for two years of service
- $ 150 per month for at least three years of service.
As SHRM’s survey showed, “few employers offer loan repayment benefits,” she said. “Enter now and you can differentiate yourself from your competition. It is a factor of difference. “