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Adoption rate of loan repayment benefits still low, despite much attention
Although employers that help repay their workers’ student loans report that it boosts morale and productivity—and that this aid is especially valued by Millennials—only 4 percent of Society for Human Resource Management (SHRM) members say that their organizations offered this benefit in 2016.
There are 40 million Americans with student loan debt, bringing the total U.S. student debt burden to more than $1.3 trillion, the federal government estimates. Employers are taking notice, and loan-repayment aid is most likely to be offered by businesses facing difficulty in recruiting employees with in-demand skills, whether that be nurses, financial analysts or software designers, and by those that want to differentiate themselves as attractive to recent graduates and younger workers.
But despite much media attention, SHRM’s
Employee Benefits report, released June 20, shows that among SHRM members only 4 percent of organizations offer student-debt repayment assistance, up from 3 percent in 2015.
“Employer-provided loan repayment assistance is still relatively new and it can be a high-cost benefit for employers. But this benefit could see future growth given high rates of student loan debt,” said Evren Esen, director of SHRM's survey programs. “It is especially attractive to younger workers with highly valued skills.”
separate survey findings released in June, IonTuition, a provider of web-based student loan management tools, asked managers who influenced hiring decisions at their companies to share their perspective on student loan repayment assistance.
Nearly all of the 412 managers who responded said that employees with student loans would take advantage of this benefit and that the benefit would improve employee morale, productivity and general well-being while providing the company with a talent recruitment and retention advantage.
Managers also believe that Millennials, the generation with the most student loan debt, value student loan benefits more than previous generations.
“The market for these services is growing and shows no signs of being temporary,” according to
an IonTuition white paper that highlighted the following survey findings:
• Stress test. More than 90 percent of managers said that student loan debt creates stress for employees. Approximately 80 percent believe this financial stress decreases employee productivity.
• Attract and retain. Nearly 80 percent believe offering a student loan repayment program would support talent recruitment. Also, 70 percent believe that offering such a program would improve employee retention and morale.
• Plan for the future. Nearly 75 percent think that employees contribute less money to their 401(k) because of their student loans. Nearly 85 percent stated that employees would enjoy the option of making their student loan payments via automatic payroll deductions.
On average 53 percent of companies that provide student loan assistance benefits contribute more than $1,000 per year toward each enrolled employee’s student loan debt, while 16 percent contributed less than $500.
Four Loan Assistance Approaches
Four approaches have emerged regarding how to provide student loan assistance, noted Samuel A. Henson, vice president and director of legislative and regulatory affairs at Lockton, a national insurance brokerage,
in a June 2016 online post. These are the:
• Education approach—Providing simple, straightforward educational employee counseling, both in person and online. These services are relatively low cost and easy to implement but require engaged employees.
• Attraction approach—Offering sign-on bonuses in the form of student loan payoffs. Employers using solely this approach may miss opportunities with tenured employees.
• Retention approach—Offering periodic student loan payments for employees who complete service requirements. Payments extend years after hire, creating a retention incentive.
• 401(k) approach—Working in conjunction with workplace 401(k) plans, employees make student loan payments via payroll deductions that are matched by their employer in the form of pretax plan contributions. From a compliance perspective, employers would need to amend existing 401(k) plan documents, and a contribution provided to a select group may require testing requirements that the plan otherwise could avoid. (For another view on mixing student loan payments with matched 401(k) contributions, see
Online’s article “A Student Loan Repayment Benefit with a Twist.”)
“Student loan debt is not just an employee problem,” Henson noted. “The impact on employees’ personal well-being, their performance on the job, and their retirement readiness is significant, and it is all felt by their employers.”
Flexibility in Plan Design
“For employers considering a student loan repayment benefit option, they will need to remember that this is considered taxable income to the employee, unlike the familiar tuition reimbursement that provides employers with a deduction up to $5,250 paid on behalf of the employee,” advised Bobbi Kloss, HR director at Benefit Advisors Network (BAN), a consortium of health and welfare benefit brokers across the U.S.
“Whenever offering benefits to one class of employees—such as those with student debt—it’s also important to consider balancing the benefit offerings for others,” she noted, “If another employee does not have student loans, employers should consider ensuring they offer other benefit options that might address their particular needs at a different life stage, such as greater work/life balance options.”
Related SHRM Article:
Easing the Student Loan Debt Burden? Points to Consider,
SHRM Online Benefits, January 2016
Related News Article:
Student Loan Benefits: Dormant, or Ready to Explode?, BenefitsPro, July 2016
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