This problem is magnified by the fact that 66% of millennial workers expect to leave their current employer within the next four years – a powerful statistic considering this age group will make up over half the U.S. workforce by year 2020.¹ This turnover rate will cost organizations an estimated $30.5 billion annually.² In an attempt to stand out and build loyalty with this emerging workforce, employers are introducing new recruiting methods and benefit packages. Some of the latest perks include extended mid-day breaks, dog walking services, open work environments, unlimited time off, free lunch and snacks, flexible schedules and employee game rooms. While these are great, none of them address one of the biggest stressors among young people today – debt. If you haven’t already, it’s time to consider a student loan repayment program.
It may not have the same appeal as a game room or unlimited time off, but a student loan repayment program can be an effective way to attract and retain key talent while addressing an important issue among the younger workforce. Let’s cover the basics of this emerging benefit trend.
The Growing Debt Problem
The cost of education has increased 75% over the last 20 years.³ Seventy-one percent of students now graduate with student loans and the average owed for a four-year degree exceeds $37,000.⁴ This financial stress can contribute to poor health and decreased productivity. Furthermore, these indebted employees often delay major life decisions such as buying a home, getting married or having children. Millennials are also delaying retirement savings due to the financial burden of student loans. This means that the traditional employer-sponsored 401(k) plan may not yield the same recruitment and retention results it once did.
Student Loan Repayment Program
To help combat the $1.4 trillion in outstanding student loan debt currently in the United States, employers are discovering the value of adding a student loan repayment program to their benefits package. Not only can it help them stand out in a tight job market, but it can also decrease recruiting, training and onboarding costs while improving morale and retention. For every $1 the employer contributes, it returns approximately $1.66 to the employee in principal payment and interest savings.
According to the Society for Human Resource Management, only 4% of employers currently offer some form of student loan assistance, but this number is expected to grow exponentially in the future. Notable companies that currently offer a student loan repayment program include Fidelity, PricewaterhouseCoopers, Aetna, Staples and Penguin Random House. Losing talented workers can drastically impact business operations and financials. The costs associated with advertising for open positions, interviewing, screening, training and onboarding are escalating, and employers often do not have a firm grasp on what the tangible and intangible cost of turnover is to their organization. The table illustrates the potential savings impact for two companies.
Incorporating a student loan repayment program doesn’t have to be difficult. Resources are available to make this an easy addition to your current benefits package. Ameritas Life Insurance Corp. and Nelnet, Inc. have recently combined their respective expertise to form a joint venture called BenefitEd – a comprehensive student loan repayment solution. Their partnership leverages decades of experience serving human resource managers and processing student loan payments. BenefitEd helps employers create a customized educational benefit program that is tailored to their unique employee population. Employers can also contribute to a 529 college savings plan for those without student debt.
At SilverStone Group, we understand that employee benefit budgets are tight. Our specialists can perform a simplified analysis to illustrate just how beneficial a student loan repayment program can be for your organization. An annual turnover decrease of just 1% can make this a cost-neutral addition to your benefits program. To learn more, contact our team of experts today.
¹Smith, Allen. “How Employers Can Lawfully Attract Millennial Job Applicants.” September 21, 2017. Accessed on May 18, 2018 at www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/millennials-lawfully-recruit.aspx
² Adkins, Amy. “Millennials: The Job-Hopping Generation.” May 12, 2016. Accessed on May 18, 2018 at http://news.gallup.com/businessjournal/191459/millennials-job-hopping-generation.aspx
³ “Quick Facts about Student Debt.” March 2014. The Institute for College Access & Success. Accessed on May 18, 2018 at https://ticas.org/sites/default/files/pub_files/Debt_Facts_and_Sources.pdf
⁴ “A Look at the Shocking Student Loan Debt Statistics for 2018.” May 1, 2018. Student Loan Hero website. Accessed on May 18, 2018 at https://studentloanhero.com/student-loan-debt-statistics/.com.
This article originally appeared in the 2018 | ISSUE TWO of the SilverLink magazine, under the title “A Benefit for Employers & Their Employees.” To receive a complimentary subscription to the SilverLink magazine, sign up here.