If you're starting a career in business, and your company doesn't offer a student loan repayment program, you might have trouble staying afloat in the long-term. In fact, it's estimated that 44 percent of millennials will leave their jobs because they can't afford the debt they accrued during their education.
Aside from the obvious benefits of offering a loan repayment plan to employees (it keeps them around longer), companies that allocate funds this way can also help keep up morale and retain top talent.
What is Student Loan Repayment Assistance
A student loan repayment program offers a financial incentive to employees so that they can pay off their student loans. These programs are typically offered by medium - large companies, and function in one of two ways:
Employee-contributed funds are used to pay off student loans up to a certain amount per year. For example, the employee contributes $2,000 per year to their student loan debt, and the company will match that amount. This way, the employee is only paying $2,000 out of pocket.
The company puts money toward the employee's student loan payments. This is usually done on a monthly basis. For example, if the employee owes $300 per month toward their student loans, the company will pay this amount for them. This way, the employee only has to make one monthly payment, and does not have to allocate any funds from their paycheck toward repaying their loans.
Benefits of Student Loan Repayment Assistance
Both employer-funded and employer-administered programs offer a lot of benefits for both employees and companies alike.
The Benefits for Employees
There are many reasons why employees are attracted to companies that provide student loan repayment assistance.
1. Helps Relieve Stress
Loan Repayment Assistance Plans can help employees save more money. Having extra money every month for any purpose – whether it's an emergency expense, or just to go out with friends – can drastically improve stress levels as well as overall happiness. Loan repayment assistance also helps by giving employees more time to focus on work without worrying about their debt.
2. Employees Feel More Secure
When debt-burdened millennials fear making long-term financial commitments (like purchasing a home or car) they may find that major life choices are affected by their debt. Loan assistance programs can give employees the security of knowing they will not be held back by their student loans, and can make big life decisions with confidence.
3. Makes Employees More Attractive to Recruiters
While there's a lot of perks to being employed by a company that offers loan assistance, employees often face more opportunities than they know what to do with. With other companies offering similar programs, employees can pick and choose which offers they take.
4. They Can Help you Move up in the company
Employees who participate in repayment programs become very valuable assets to companies, because they have invested not only time in your employment at the company, but also money in you. Employers who offer employees Loan Repayment assistance are more likely to attract talent that plan on staying with the company for years to come. Companies like to promote from within, and if your company has helped you pay off your student loans, that likely means they want you there for the foreseeable future and that you have opportunities at advancement.
The Benefits for Companies
1. They Bring in New Talent
With a student loan repayment program, companies can attract high-quality talent that values working for a company that provides competitive employee benefits such as student loan repayment programs.
2. They can help companies remain competitive
By offering student loan repayment programs, employers can show future employees that there are perks to working for their company other than just traditional health benefits. It can show that you are a dynamic company with an understanding of the changing workforce environment as well as needs of the changing workforce.
3. They Help Keep Morale High in the Workplace
When employees are happy, they work harder, stay longer, and are less likely to leave the company because of financial difficulties. Loan assistance helps ensure that employees have a stable financial situation that allows them to take on additional responsibilities with relatively low stress levels.
4. They Improve Company Culture
Companies that offer loan assistance to employees help ensure that their culture is one of the best around. This helps keep employees motivated, happy, and more productive.
Offering a student loan repayment assistance program is a great way for your company to attract and retain high-quality talent, while simultaneously improving employee and company morale. While there are many programs out there to choose from, the important thing is to find something that will work on both the employer and employee sides.
Student loan repayment programs work well when each side is treated well: the employee gets help in paying off debt, while the employer has employees that are satisfied with their workplace.