For our industry, there has been much talk and speculation about what might happen going forward with Donald Trump in the White House. Regardless of what happens over the next for year, we are already seeing a new wave of employer policies, starting with student loan debt.
This is a topic on the minds of many. Student loan debt works out to be an average of $30,000 per student, which equates to $1.3 trillion in national student debt.
Why should a benefit advisor be concerned? For starters, employers are very concerned with the need for attracting employees. Therefore, they are turning to their benefit advisors for suggestions on how to improve their benefits offering to attract and retain employees.
Employers need to be creative to deliver a compensation package that is going to attract, retain, and motivate employees. The Affordable Care Act, the millennial generation, and lack of skilled laborers are just some of the factors that have employers scratching their heads as they search for ideas on how to fill open slots and maintain their workforce.
With ACA equaling the playing field, traditional health and welfare benefits are no longer the carrot, which draws candidates to any particular employer.
Many new benefits are now being considered to provide employers with a competitive advantage. The benefit advisor should be aware of, and fluent on, everything from paternity leave, commuter subsidy, housing assistance, and quickly becoming one of the most popular, student loan repayment benefits.
Why is student loan repayment an important benefit consideration?
New hires will jump to the first job, typically dismayed between the salary they expected and the salary received. To pay down their debt, applicants are known to accept a lower offer, though with their eye on the next bump in increase or jumping ship for a more desirable compensation package.
According to the Bureau of Labor Statistics, the millennial age group (both men and women) has an average tenure of 3.1 years. Consider the average turnover costs and it’s easy to see why employers are looking to sweeten the deal.
Secondly, for those employees pursuing graduate degrees, the cost of the degree has current employees motivated to move up the career ladder. A student loan repayment benefit may help prevent the desire to look elsewhere in any transition period If their current employer does not have an available mechanism in place for advancement.
Arming themselves with knowledge, trusted benefit advisors should be aware that 76 percent of respondents to the Life Delayed survey conducted by American Student Association agreed that their choice to take a job would be considerably affected or decided based on an employer's willingness to offer a student loan repayment program.
Flexibility in plan design
Benefit advisors should already be holding workforce planning discussions with their clients.
As part of their SOP, an advisor should be analyzing employee census data to understand the organizations demographics, engaging the HR department in conversation regarding issues that are affecting their abilities to recruit, maintaining or driving employees work-life balance struggles, and reviewing the employee handbook to see what polices are already in place. This will help to position you as a subject matter expert on work-life balance.
Follow up your analysis with sharing best practices from some of the industry leaders. Employers like PwC, who typically lead the way in offering an attractive benefit package, are establishing creative student loan repayment plans.
We are seeing a variety of offerings, from offering a flat monthly amount, to a bonus at milestone anniversary dates, to split contributions, and to student loan repayment and distribution into a 401(k).
For an employer considering a student loan repayment benefit option, they will need to remember that this is considered taxable income to the employee, unlike the familiar tuition reimbursement, which provides employers a deduction up to $5,250 paid on behalf of the employee. If including employer distribution into a 401(k) plan, employers will also need to remember to amend the plan.
From an employee relations standpoint, it would be important to consider recommending to your client that if they are offering benefits to a class of employee that it may be beneficial to keep employee morale high by balancing the benefit offerings.
If another employee does not have student loans, employers should consider ensuring they offer a variety of work-life benefit options to meet variables in the workforce.
As the trusted advisor, you can assist your client by to determine if this benefit makes sense for their organization. A quick Google search pulls up programs available such as Ed Assist, through Bright Horizons, which offer a student loan repayment program that will allow for direct pay down of the student’s loan.