The student loan crisis is a serious problem in this country. According to StudentLoanHero.com, 44 million borrowers owe nearly $1.3 trillion in student loans. In fact, the average 2016 college graduate walks away with $37,172 of debt. With the costs of higher education soaring, it is nearly impossible to finish a degree program without taking on student loan debt. New college graduates are now faced with the pressures of finding work quickly once their academic careers end as the start of the repayment period looms. The good news is that recent grads, especially millennials, are now the focus of a new employer benefit initiative: student loan repayment!
So why student loan repayment? Employers understand that investing in human capital establishes loyalty, reduces turnover, increases the size of their applicant pool, and also improves the quality of prospective hires. According to the 2015 Society for Human Resource Management Employee Benefit survey, less than 3% of all companies offer this benefit. It is predicted, however, that more will come on board in 2017. The program is simple. Employers will make structured payments based on the length of employment.
Current awards can range from $500 - $6,000 per year for periods ranging anywhere from 3 up to 10 years. Payments are frequently made directly to the lenders and counted as taxable income to the employee. Some of the forward-thinking companies who currently offer the benefit include Fidelity (financial services), Pricewaterhouse Cooper (accounting and consulting), Aetna (healthcare), Penguin Random House (book publishing), and Staples (office supply retail). Check out a more comprehensive list on The College Investor.com.
Job-seekers find loan repayment to be more attractive than just a 401K, full medical benefits, and vacation because these benefits have a future impact on their lives. Student loan repayment starts within months of graduation and can take years to pay off. New employees will see the more immediate impact of reduced debt and a significant return on their educational investment. In some cases, company monthly payments are higher than the minimum that cash-strapped new grads can pay. This advantage can lead to paying the debt off sooner and saving hundreds or even thousands in interest.
According to a report just released by the Government Accountability Office, the problem has a far-reaching arm as approximately 114,000 seniors aged 50+ are having their Social Security checks garnished to repay defaulted loans. Also reported is an increase to the tune of 540% in borrowers over age 65 who wrestle with the same issue. Can you imagine being 65 years old and still repaying student loan debt?
While the student loan repayment benefit may not reduce the need for student loans, at least for now, some newly-employed graduates can breathe a bit easier as they work to build their futures. The success in recruitment and retention of new talent may spur the efforts of other companies to follow the trend. Considering the current landscape, that is probably a very wise thing to do.