As voluntary benefits become “must haves” in the war to attract and retain talent, employers are increasingly offering perks that focus on education. From professional development to student loan repayment, companies are positioning themselves as partners when it comes to the education of employees and their families.
Tuition reimbursement isn’t new, but new twists on tuition payments for staff and dependents are rising in popularity.
The weight of student loan debt is a burden carried by about 44 million Americans. On average, students owe over $25,000 by the time they graduate. With more than $1.4 trillion dollars in loans outstanding, the default rate is over 10 percent and the delinquency rate over five percent according to The Student Loan Report.
A handful of large companies are beginning to offer student loan debt payments to employees either independently or through new student loan repayment vendors. Currently, no tax advantage exists for employers; in fact any contributions they make are taxable to the employee as income and can add to payroll tax costs. But companies like PWC, Fidelity, Estee Lauder and Staples”still see the benefit of directly relieving the financial stress of their employees,” says Peter Marcia, CEO of YouDecide.
Through vendors, employers are offering a myriad of solutions that range from education to refinancing options to administering employer contributions, Marcia says. Employers, he advises, should vet vendors to understand the tools they offer, as well as interest and approval rates. Some protections of federal loans that aren’t financially underwritten can be eliminated if employees refinance. So seek a vendor “well versed in explaining the implications of refinancing a student loan” especially if the original loan was a federal loan (about 80 percent fall into this category).
Park notes that these types of benefits can be attractive to various generations of candidates and employees. “For younger employees looking for immediate relief of college debt and older employees strategically planning for their dependents’ futures,” Park says. “Intelligently leveraging the most beneficial ways to finance and reap tax savings for education is smart business.”
A benefit like this can be a serious competitive advantage, according to David Aronson, CEO of Peanut Butter Student Loan Assistance. “With unemployment approaching its lowest point since the 1960s, it’s never been more competitive for companies to compete for talent,” he said. “And it’s never been more important for employers to differentiate.”
To attract, engage and retain staff, Aronson says, “offering student loan assistance demonstrates that employers understand the plight of today’s workforce and are committed to building long-term partnerships with their team members.” And employers reap rewards. In their Millennial Benefits Preferences study, Peanut Butter found:
- 85 percent of respondents who received two similar job offers (salary, benefits and perks) would accept the offer that included contributions to student loan payments;
- Respondents indicated they’d stay with their employer up to 36 percent longer if receiving loan assistance; and
- Millennials with a college degree prefer loan repay benefits two to 12 times more than any other perk (including retirement funds and health coverage).
As employers seek to distinguish themselves from the competition with voluntary benefits, the available offerings continue to evolve. So what’s next?
Park said he believes that financial wellness and education benefits are next on the horizon. He said sees them as an important component for productivity and retention. In addition to reducing employee misunderstandings and stress, he said, “they really do contribute to a sense of employee loyalty.”
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