Student loan debt rises in the U.S. each year, and the total reached $1.73 trillion most recently. With young adults joining the workforce having borrowed an average of $30,000 to obtain a bachelor’s degree, student loan repayment programs are becoming an intriguing way to boost a benefit offering profile.
According to a study from American Student Assistance (ASA):
- 59% of young workers say paying off their student loans is a higher priority than saving for retirement
- 52% of workers plan on or are looking for new jobs
- 86% of students would commit to their employers for five years or more if they offered an employer-sponsored student loan repayment program
In our current environment, student loan debt repayment is quickly becoming one of the most efficient ways to attract and retain employees.
Due to the extension of the CARES Act, employers can now offer a tax-free student loan benefit up to $5,250 per employee per year, giving them a tax break as well as fulfilling a benefit need. There are three different programs employers can utilize when introducing this arrangement to their benefit lineup: employer direct pay, employer match payments and a flexible match program. Employers can also offer a “go-to” resource for their employee’s student loan needs, such as a student loan advisor/counseling services.
Debt in general remains a nationwide issue, with 29% of U.S. workers taking a loan and/or an early withdrawal from a 401(k) or individual retirement account. Most employees are looking for employers that offer emergency savings programs and would be willing to actively participate in one if their employer matched their contributions.
With federal loan payments being put in forbearance until August 31, 2022, employers can use this time to develop a student loan repayment benefit to help recruit, retain, support and build talent. This is a benefit offering the International Foundation will be keeping a close eye on. When we surveyed employers in 2020, 6% offered the benefit. We’re asking employers/plan sponsors the same question again this year and will be reporting on the results.
Tune into the ISCEBS Chapter Webcast Committee’s Student Loans: The New “Wow” Employee Benefit webcast to learn more about this innovative benefit from speaker David Krasnow.
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