A growing number of companies are adding student loan repayment assistance benefits to help attract and retain employees. However, more than four in 10 either will rethink their current strategy – or are unsure of their plans to make changes – in the wake of the Biden administration's new policy to cancel some loans.
The administration is directing the U.S. Department of Education to cancel $10,000 in federal student loan debt for borrowers earning less than $125,000 annually. Pell Grant recipients will see up to $20,000 eliminated. According to the White House, this initiative will assist up to 43 million borrowers, including eliminating the full remaining balance for roughly 20 million people.
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In a survey by the International Foundation of Employee Benefit Plans, 11% of employers are considering revisiting their current repayment strategy, 58% do not plan to change current policies and 31% are not sure.
Although only 9% of respondents now offer student loan repayment benefits, 16% are considering doing so. Repayment benefits slowly have been gaining popularity over the past few years, giving many organizations a competitive advantage in the challenging labor market. When asked whether their student loan repayment offerings have been successful in achieving workplace goals, employers responded that they have been successful in:
- Retaining staff (45%)
- Reducing staff financial stress (45%)
- Attracting staff (31%)
- Increasing staff engagement (24%)
For employers offering such benefits, a variety of approaches were cited:
- 45% pay the employee's lending institution directly rather than providing extra compensation to the employee
- 28% reported reimbursement or direct payment to the employee
- 21% said they offer refinancing of student loan debt
- 3% provide a corresponding match into the employee's 401(k) or other defined contribution account
Related: Biden's student-loan relief adds to inflation debate
Perceived unfairness among employees (such as resentment from employees who do not benefit) was the most common challenge faced by employers offering or considering student loan repayment benefits. This was reported by more than half of employers. Other challenges include financial burdens (53%) and administrative hassles (40%).
As this research shows, strategies for student loan repayment assistance can vary widely among businesses. Julie Stich, CEBS, vice president of content for the foundation, encourages employers to weigh the pros and cons, as well as the implications for other aspects of their business.
"If considering implementing student loan repayment assistance benefits, employers should carefully determine the impact on their company," she says. "Will this be a benefit that's valued by employees? How many employees will be helped? One way to gather this information is to survey your staff: What will the financial impact be? Will this new benefit be welcomed by ALL employees, including those who long ago paid off their loans or did not attend college? While this benefit can help in talent attraction and retention, all impacts should be considered."
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Alan Goforth
Alan Goforth is a freelance writer in suburban Kansas City. In addition to freelancing for several publications, he has written a dozen books about sports and other topics.
