Thinking about Employee Student Loan Repayment? Why it Takes More than Good Intentions
There's good reason. More and more companies are realizing that highly sought after Millennials - who in 2015 graduated with an average of $35,000 in college debt - desire more than salary and health benefits, and will look favorably upon employers willing to help them pay down their share of the one-trillion-plus in educational debt.
But there's a danger that all of this enthusiasm for employee student loan repayment programs could get well-meaning companies into some trouble. It's one thing to offer to pay down employees' student loans; it's another entirely to enact it on a large scale while still ensuring it delivers on its potential. In other words, it's not just a matter of providing the money; you have to do it so that it's efficient.
Some things you'll need to know upfront:
What are Your Rules and Caps?
Just like tuition assistance, employee education debt repayment has to have some parameters. What's your plan for contribution? Is it based on a top dollar amount; on salary; on position? How will you enforce that?
How Will You Keep Track?
Even in big companies, it's surprising how many tuition programs are administered manually. And it's easy to imagine student loan repayment programs will be enacted the same way. But that's a great way to lose track. EdAssist has caseloads of data of companies inefficiently using tuition resources (and spending too much) because they have no idea of where money is going. A good program will allow you to easily call up the data and know for sure.
Who Gets the Money and How?
Planning to offer a lump sum paid directly to employees? Bad idea. Money that goes directly into employees' pockets means you lose control of where it lands. Directing money automatically to the loans solves the "where does the money go?" problem, and only minimally affects compensation strategies. "As a benefit," EdAssist VP Mark Ward said recently, "it's much more tax efficient than handing an employee cash, and it ensures designated funds go toward their intended purpose - paying off the loan."
How Will You Pay on a Large Scale?
Imagine a single benefits staffer making all payments for a company's student loan repayment program manually. Now imagine that staff member doing the same thing for 1000 employees. Not very practical. By automating the program, you not only save some poor employee the writer's cramp of scribbling individual checks, you also ensure that all the precise terms of all loans are consistently met.
How Will You Guide Employees on the Balance of Their Student Loans?
It's not enough for employers to merely pay off a portion of employees' debt; to get real value (in ROI and in employees who are feeling that important sense of financial well-being) you have to know employees are using the contribution in the most effective and efficient manner possible, and ably managing the terms of the loan. Many times, foundering on repayment isn't the result of insufficient assets, but lack knowledge causing costly mistakes. Then your contributions are just band-aids. Expert guidance for employees, then, is an essential component of any effective student loan repayment plan.All of that needs to be considered before you enact loan repayment for employees and recruits. But done right, with the right management, there's a whole lot of upside.
"Students are graduating with increasing amounts of debt," said Mark. "Companies looking for creative strategies to attract and retain a highly educated, high-value employee segment should be looking at ways to help alleviate it."