Editor’s note: This post was originally published in October 2018 and has been updated for recent news and current data as of April 2022.
The pause on federal student loan repayments was set to expire on May 1, 2022, but President Biden again extended the freeze through August 31, 2022. This is the sixth extension of the pause, which was first established in March 2020 by the Trump administration at the start of the COVID-19 pandemic.
While the status of student loan payments is in flux, it’s a good time for companies to evaluate if adding student loan repayment assistance (SLRA) is right for their organization. As more employers seek to find and retain talent in a tight labor market, they are also reexamining work offerings and formats and getting creative with benefits, including student loan repayment assistance.
SLRA can help to improve employees' financial health, reduce stress, increase productivity, and build trust and loyalty with your company that can impact employee retention as well. No matter the outcome of the administration’s decisions, employees can feel at ease that their employer is in their court if or when repayments resume.
Wondering if SLRA is right for your organization? Here’s 4 reasons why your company should offer student loan repayment assistance.
1. Your employees are likely struggling with student debt
Student loan debt is rampant in the United States and Hawaii is no exception. According to the Education Data Initiative, $4.5 billion in student loan debt belongs to Hawaii residents and the average student loan debt is $36,765. According to the same source, 122,400 student loan borrowers live in Hawaii. Looking at our state’s workforce numbers, that’s about 1/6 of Hawaii’s workforce saddled with student loan debt. Furthermore, not all of this debt is covered under the freezes and many borrowers of private loans continue to make monthly payments.
This means that your employees – especially those in younger generations – are likely facing staggering amounts of debt. While student loan pauses may help paychecks go further, lingering uncertainty affects other important decisions, such as how much to put in a retirement account, and when to buy a home. Student loan debt guides many important decisions and can often distract employees from making meaningful contributions at work.
2. They will stay longer if they receive assistance
Employees that stay at your company for a short time cost your organization substantial investment and resources. According to studies by Society for Human Resource Management, when an employee leaves, it costs a business about 6-9 months of their salary.
One of the biggest benefits to offering student loan repayment assistance is that employees who take advantage of the benefit are likely to stay longer at your company. According to an ASA survey, 86% of employees would work for you for five years if you helped pay down their student loans.
Any benefit that boosts retention should be closely considered, as the average millennial employee plans to stay at their job for less than three years, according to the Future Workplace.
3. Student loan repayment is a preferred benefit
Today’s organizations can offer a variety of different benefits to employees. Indeed, many turn to perks like free food, gym memberships, and other workplace enhancements to attract, engage and retain employees.
However, student loan repayment assistance is preferred over other benefits and perks. In fact, student loan repayment assistance is 11x more attractive to employees than gym memberships, according to a benefit preferences study conducted by Peanut Butter.
4. It's relatively easy to implement
Thanks to new technologies and programs offered by companies, including ProService Hawaii, student loan repayment assistance programs can be easy to implement. These repayment programs offer:
- Easy set up for employers. Employers can integrate their student loan repayment programs with payroll, so there’s no messy paperwork or complicated billing.
- Seamless enrollment for employees. These systems are extremely easy and seamless for employees to use.
- Flexible contribution amounts. Employers can choose how much to contribute to individual employees. Often, employers offer more assistance based on how long an employee has been with the organization.
The positive effects of student loan repayment
Student loan repayment assistance is one of the most attractive benefits you can offer, especially in a world where workers are saddled with large amounts of debt and at the mercy of loan repayment extensions.
These programs are designed to reduce turnover among workers of all ages and engage your highly-qualified workers by improving their financial wellbeing, ultimately giving them more headspace to focus on their work. By choosing to assist employees with their debt, you can set yourself apart from other employers competing for the same college-educated talent and gain the trust and loyalty of your employees to become an employer of choice.