Employer Loan Repayment Assistance Programs: The Math Adds Up

student loan repayment for employees

"Student Loan Repayment is the hottest benefit of 2018."

So goes the headline of a Forbes article highlighting the value of the benefit, and profiling just a few of the growing list of trailblazers (including three of our clients) leading the pack.

"To attract and retain recent graduates," wrote personal finance columnist Zack Freidman, "companies are expanding their employee benefit programs to help reduce student loan debt for their employees."

It's no surprise to us.

Adding up the Math of Employer Loan Repayment Assistance Programs

Student debt is a $1.5 trillion problem saddling college graduates with an average of $35,000 each. The indebted are understandably drawn to employers offering help.

The math alone is compelling. A newly graduated hire with a $20,000 federal loan at 5% interest will pay $5,700 in interest over ten years. An employer paying $2,000 annually toward the principal will cut the employee's payoff time from 10 years to five, and interest from $5,700 to $2,900. That means over five years, your student loan repayment investment gets a 28% bump -- $12,800 of benefits for the price of $10,000.

And there are other good reasons for offering it.

Financial wellness

Payments ten years in the future can seem like an eternity, five years is within reach. So quietly shrinking the obligation to manageable proportions puts an end date in sight. And never underestimate the psychic benefits of being able to see a debt-free future.

Low maintenance, even on a large scale

Automating via a third party lets you run a large-scale program and pay directly to loan servicers. That ensures money goes where it needs to (to pay loans and not in employees' pockets) and arrives every month. Then you can just sit back and watch the ROI.

Tailored recruitment

If desired, employer loan repayment assistance programs can be tailored to a targeted audience -- paying debt for the grads with the specific skills your organization needs to hire.

Retention power

Debt-shrinking regular payments are the gifts that keep on giving -- reminding employees every month of your investment in them.

The above does more than show loan repayment's appeal. It also answers the question, why not just increase salary? A nominal pay bump or one-time bonus simply can't deliver the same bang as ongoing debt relief. Plus, "my company is paying my college debt" has a big braggability factor -- something not to be underestimated in an era of single digit unemployment and record-setting job openings.

As Forbes puts it, "expect this benefit to spread to other companies that want to recruit and retain a loyal employee base.

"It's employee-centric. It's forward-thinking. It's solution-oriented."

We couldn't agree more.  

Written by: Alan Robins

About the Author

Alan Robins at Bright Horizons

As Director of Product Marketing, Alan drives original research and thought leadership for Bright Horizons education benefits programs, drawing on his extensive experience helping companies optimize education programs to support their Talent and HR objectives. Prior to Bright Horizons, Alan was at Gartner, a global leader in providing advisory services to technology and business executives, where he led new product teams in Europe and the US.