For today’s employees, record levels of student debt has become a major source of financial stress, frequently displacing more traditional concerns such as buying a home or supporting an expanding family. In fact, a PricewaterhouseCoopers (PwC) Employee Financial Wellness Survey found nearly half of all Millennial employees have at least one student loan, and 80% say their student loans have affected their ability to meet other financial goals.
Unfortunately, worries about student loan debt don’t disappear when an employee walks in the office door. Workers are feeling the effects of student loan debt every day—and it’s impacting their work.
Below are a few ways workdays are affected by student loan debt, along with tips for how you can orient your company around a solutions-driven approach.
Attracting top talent
According to a survey done by American Student Assistance (ASA®), 86% of employees would commit to a company for five years if the employer helped pay back their student loans. This is a priority among more job seekers today as they look to secure more financial stability and embark on their careers.
Retaining promising employees
High levels of student debt could tempt young employees — who may tend to job-hop more often than older counterparts — to leave your company for higher salaries or switch to firms that offer loan repayment benefits. Research by Robert Half suggests that 64% of workers favor switching to a new company every few years, especially if it comes with a pay increase and helps them advance in the workforce. Makes sense, considering that the average individual with student loans pays an average of $393 per month.
Keeping workers mentally and physically healthy
Financial stress—including the student loan debt crisis—can take a toll on employees’ mental and physical wellness. This may not only increase their utilization of your company’s health insurance, according to a study done by Lockton, but also potentially add to the number of sick/vacation days they take.
Maintaining employee engagement
Stress can also reduce an employee’s ability to focus on their work. In fact, 80% of Millennial employees surveyed said that their student loans have a moderate or significant impact on their ability to meet their financial goals, and 49% said they are distracted by their finances at work, spending three hours or more each week dealing with issues, according to PwC.
Encouraging participation in other workplace benefit plans
An American Student Assistance (ASA®) survey found that 62% of employees who have student loans say they’ve put off investing for retirement. And employees who struggle to keep up with student loan payments are also less likely than their loan-free counterparts to participate in other workplace programs such as 401(k) matching plans, according to an Aon Hewitt study, which also found that 51% of employees who have student loans contribute no more than 5% of their pay to their workplace retirement plan.
What employers can do to decrease effects of student loan debt
Because there are so many clear links between the student loan debt crisis and workplace success , many employers now offer loan-repayment options as an employee benefit.
Here’s some practical, actionable advice for companies considering establishing a similar perk.
A MetLife study revealed that 72% of employees surveyed indicated that the ability to customize benefits increases loyalty to their employer. Student loan repayment benefits can be a great way for a company to increase employee loyalty. For example, a firm could offer a $5,000 student loan repayment benefit to employees after five years with the company, and an additional $1,000 per year for the following five years—rewarding devoted employees while simultaneously spreading out the employer’s financial commitment over multiple years.
Help with student loan repayment benefits
Employers can help workers connect with providers that offer private loan refinancing at attractive rates. Companies have the ability to provide unique offerings to their employees with benefits like these while helping to broaden their financial literacy.
Under the CARES Act, employers and employees can now receive tax breaks for workplace student loan reimbursements up to $5,250 per employee annually. According to SHRM, since only 8% of companies currently offers a benefit like this, now is the time to act and implement an innovative and meaningful benefit.
A good argument, perhaps, for getting ahead of the curve and embracing tomorrow’s standard benefit today—before your competitors.