A version of this post appeared on HR.com, you can view the original version here.
Preparing to receive budget approval for your new benefits program
Interested in taking the perfect benefits package proposal to your executive team and walking away with unanimous approval?
It’s no secret that Student Loan Repayment is the hottest new benefit. Employers now have the opportunity to engage college-educated talent with a benefit that’s meaningful to them, and in-turn to reduce hiring timelines, extend employee tenure, and improve diversity.
For the purpose of this post, we’ll assume that your company has already decided to offer all employees (e.g., full-timers, part-timers, contractors) a base level of Student Loan Assistance by providing Student Loan Resources.
When executives decide on whether or not to include Student Loan Repayment in the benefits budget, most seek answers to the same three questions:
1. How Many of Our Employees Hold Student Debt?
With no other information, we could be pretty confident in estimating that a little over a quarter of your employees hold student debt; that’s because 26% of the US workforce holds student loans. And if we know that your company operates in professional services, financial services, healthcare, or technology, its likely that about 40% of your team members are encumbered by student loans. Finally, if the age of your team members also becomes available, we can get even closer in predicting the prevalence of student debt at your company. Peanut Butter provides each of our clients with a Student Debt Prevalence Analysis.
2. How Should We Design Our Student Loan Repayment Plan?
This is really several questions rolled into one. Who should be eligible for Student Loan Repayment? How much should we contribute? Should there be any special qualification criteria? Let’s look at each of these.
First, defining eligibility. The most common approach employers take is to extend eligibility to all full-time employees (FTEs), and for companies under 1,000 employees this is almost always the case; however, it’s not required.
Some companies will prefer a phased roll-out of the benefit and the taxable nature of Student Loan Repayment means that it can be offered to some employees without being offered to all. For companies seeking to focus their benefit investment on the area of greatest need (e.g., curbing turnover in the call center) or highest opportunity (e.g., closing out open job reqs for IT roles), restricting the eligible population for the first plan year can be a great approach. Common ways to restrict eligibility include by job level (e.g., Manager-level and below), by function (e.g., nurses only), and by program (e.g., leadership development program associates only).
Second, determining the contribution amount. The median employer contribution we’re seeing is just $50 per month. The reason? Employers are competing for talent based on whether they offer Student Loan Repayment at all, not based on how much they offer! Although $50 per month is modest from the employer’s perspective, it’s meaningful to employees — it will help the average student loan borrower get out from under her loans in 8 years instead of 10 and save close to $7,000 in principal and interest over the life of her loans.
While some employers might like to offer $100 per month, it’s often smart to start low. By starting with a $50 per month contribution in plan year 1, an employer is able to:
(1) Pinpoint enrollment,
(2) Minimize year-one budget, and
(3) Save some goodwill to spread in year two, if you decide next year, with data-in-hand, to increase contributions.
Third, consider a holding period. When companies see high turnover in the first few months of employment, they may choose to include a holding period. For example, an employee eligible for a Student Loan Repayment plan that includes a 3 month holding period, would not qualify to receive contributions until she has completed 3 months of service.
We recommend that companies avoid other types of special qualification criteria (e.g., degree type earned, completion of degree, or time since a degree was completed), because they add substantial complexity when managers, recruiters, and HR team members attempt to communicate the program to employees.
3. What’s the Return to Our Company?
This is actually a number of questions combined, as well. How many employees will participate? How much faster can we hire? How much can we save on employee turnover? Let’s quickly explore each question.
Participation will be based on your answers to executive question #1 (i.e., how prevalent is student debt within the eligible population) and question #2 (i.e., how is the plan designed). In our experience, programs that are simple and well-communicated will see participation from 50-80% of the employees that hold student debt. At the average company in tech, healthcare, professional services, or financial services, that means 20-32% of employees will participate, and for companies in other industries, it means that a well-designed plan will see 13-21% of their FTEs participate. This is an incredible opportunity for the company to engage talented workers.
Numerous studies have shown that job seekers are interested in Student Loan Assistance and more are willing to accept an offer that includes student loan assistance. By improving offer acceptance rates, employers can keep managers focused on running the business rather than hiring, and spend less time and money filling the hiring funnel. The Millennial Benefit Preferences study found that 85% of respondents would accept an offer that includes student loan assistance. What’s your company’s offer acceptance rate?
Similarly, companies are seeing employees stay longer when student loan assistance is offered. Medix’s VP of People, Mike Ceretto, said “employees taking advantage of our company’s Student Loan Assistance program are very pleased with the benefit. It has helped us decrease turnover, attract better talent and, most importantly, positively impact our teams’ lives.” The Millennial Benefit Preferences study found that respondents, on average, would be willing to stay 36% longer when student loan repayment is offered. How much could your company save on the costs of lost productivity, rehiring, and retraining, when employees stay with the company 36% longer than they are now?
Finally, can our company afford to wait? SHRM and others have reported dramatic increases in the number of employers offering Student Loan Repayment. Your company still has a chance to use Student Loan Repayment to differentiate its employment value proposition, but that opportunity will not be around forever.
Our team at Peanut Butter supports employers in designing and implementing effective Student Loan Assistance programs. If you have questions, we’re here to help, just visit our “Get Started” page to begin working with a Peanut Butter Client Solutions professional.
If you’re ready to sign up now, the annual fee for Student Loan Resources includes Program Support wherein your Customer Success Manager will provide you with the following materials, customized for your company, to help you finalize your business case for Student Loan Repayment:
- Student Debt Prevalence Analysis
- Student Loan Repayment Plan Design Recommendation
- Student Loan Repayment Plan Participation & ROI Estimate
Bonus #1: SHRM recently highlighted 3 core tenants for the effective design and implementation of Student Loan Assistance programs with insights from Nicole Skaluba (SPHR), Head of People, at Rise Interactive.
Bonus #2: The Three Most Popular Student Loan Assistance Programs are covered here, including the insights on why employers choose each program design.