Why Student Loan Repayment Assistance is an Essential Benefit

By Dennis Cash

There is one thing we know for sure: More and more employees are entering the workforce with student loan debt. The Federal Reserve reports that more than 44 million American adults owe $1.5 trillion in student loans. Another $1.27 trillion in new student loans will be added by 2028.
Employees are looking for employers who will help them pay off their debt. In return, they’re willing to commit to their employer for several years. So this makes student loan repayment an essential benefit.
The facts about student loan debt.

In business surveys, employers report that helping employees repay student loan debt is not a priority or an issue of significant concern to workers. But national statistics and news reports tell another story. Consider these five facts:

1. Millennials, on average, owe $35,000 in student loans.
2. Three in 10 millennials have less than $1,000 in personal savings; 24% have no personal savings.
3. By 2025, millennials will comprise 75% of the workforce.
4. Among 2018 college graduates, 69% had student loans.
5. Employees ages 40 and older also have extensive student loan debts. And workers into their 60s owe nearly $229 billion for college loans, or about $33,000 each. They’ve taken out loans to pursue graduate degrees, get additional training, or to assist kids and grand kids in earning college degrees.
Helping employees pay off debt has definite advantages for employers and employees.

Compete for top talent with loan repayment programs.

Every employer wants the best, most talented employees they can hire. But the competition for employees is fierce, especially for younger professionals who want jobs that fit their life and professional goals.
Employers need an innovative strategy to be competitive in attracting and keeping great workers. But it doesn’t have to be complicated. Employers need to know what employees want and offer the benefits and perks they value the most.

Employees want medical and voluntary dental and vision insurance. But they also want a benefit that few employers offer: help to repay their student loans.
One study showed that 52% of employees were attracted to a job if the employer offered to assist them in repaying their student loans. Prospective workers said this benefit was more important than many other traditional benefits and perks.

Loan programs encourage loyalty

Research shows that 86% of employees with student loan debts would commit to a company for five years if their employer provided repayment assistance. Many will stay longer because paying off student loans can take employees 20 years or longer.
In most industries, the employee turnover rate is 12 to 15%. However, in specialized fields, the turnover rate can exceed 20%. When employees leave, recruitment experts say it costs employers 33% of the worker’s annual salary to hire a replacement. On average, that’s about $15,000 per person for an employee earning a median salary of $45,000 a year.
Employers who spend less money replacing employees can invest in employee development and also contribute more toward helping employees repay student loans.

Increases diversity

Prospective job applicants with student loans are actively looking for employers who provide student loan repayment assistance. And employers offering this benefit are finding that they attract an increased pool of talented, diversified workers. Few other employee benefits provide such strong interest in open positions. It’s especially valuable for businesses seeking workers for specific skilled positions. For example, many critical positions in the healthcare industry require certifications, licenses and/or degrees.

Enhances productivity

Employees are anxious about finances. They spend hours during the workday, wondering how to meet financial commitments. Over 40% of people who earned bachelor’s degrees report having high or very high emotional and financial stress.
Workers with student loans say that getting help repaying their loans would ease their stress so they can focus on their job. And employees who are satisfied at work tend to become more engaged and involved in the success of the business.

Keeps employees from defaulting on loans

Nationally, the default rate on student loans is increasing. Last year the student loan delinquencies were over $166 billion.
Missed payments can affect people’s credit scores for years. And employment options may be limited as some employers are checking employees’ credit scores before offering a position.
But if employees receive student loan repayment assistance from employers, they are more likely to pay their monthly debt. And they won’t have to deal with a poor credit rating.

Encourages saving for retirement and unexpected expenses

The majority of employees face a complex problem: Pay off debt or save for retirement. Only two-thirds of American adults are saving for retirement, but often they’re not saving enough. About 56% of Americans have only $10,000 saved for retirement. And 33% have not put any money away for future expenses.
Many employees with student loans make monthly debt payments of about $350. They have to stretch the rest of their paycheck to cover monthly living expenses. Most have nothing left to put toward retirement or save for future needs. People with student loans tend to put off buying a home or starting a family.

How employers can help

Employers can offer a student loan repayment benefit that lets employees choose to use some of their 401(k) employer matching funds to help pay off student loans. Employees can pay off debt and save for retirement at the same time. And employers don’t have to add to their budgets to offer student loan repayment.

Plan for the future

Employers can offer Employee Choice, a student loan repayment benefit exclusively offered by BenefitEd through a joint venture of Ameritas and Nelnet. It’s designed to use funds employers already have set aside for 401(k) matching contributions.
The Employee Choice plan allows employers to stretch their benefits budgets because they don’t have to adjust the budget they’ve already set aside for matching contributions. Employees can apply unused matching dollars to help repay their student loans. Or, they can split the matching funds to make a payment to their student loan debt and save the other part for retirement.
A student loan assistance benefit, like Employee Choice, also provides a competitive edge for employers.
· An American Student Assistance survey found that 92% of employees would take advantage of a match for student loan repayment.
· Research also shows that half of the workers with student loans would prefer a repayment benefit over extra time off.



Dennis Cash, director, strategic initiatives at Ameritas, oversees the development and management of strategic initiatives for Ameritas Group Division, headquartered in Lincoln, NE. Cash can be reached at 402-309-2448.