Why Your Employee Financial Wellness Program Needs a Student Loan Benefit
Move over, workplace yoga—the latest employee benefit du jour is financial wellness.
With Americans under extreme financial stress, a growing number of employers are adopting corporate financial wellness programs to combat the resulting absenteeism and loss of productivity. According to NPR, about half of US employers now offer these programs.
While the services offered as part of a financial wellness program can vary from one employer to the next, one element with nearly universal appeal is a student loan assistance benefit. About 40 million Americans now have student debt, and nearly three-quarters of college grads are leaving school with loans. The average debt for a graduating senior in 2015 was estimated at about $35,000.
Employee financial wellness programs help to reduce financial stress so workers can better focus on the job—so it’s hard to see how such a program can be effective without addressing employees’ student loans. With each graduating class facing greater student loan debt than the last, this is one financial stressor that’s not going away any time soon.
So what do employers need to know about adding a student loan assistance benefit to their financial wellness arsenal? Here are a few things to consider.
There’s more than one way to help.
There are typically two ways that employers can help out with student loans: 1) contribute money to employee student loan payments or 2) partner with a lender like SoFi to offer a student loan refinancing benefit to employees (usually with a small interest rate discount for qualified borrowers).
Both options can help make a significant dent in your employees’ debt and reduce their financial stress burden. Contributing money to employee student loans may affect your company’s bottom line, but the option could become more attractive very soon if the Employer Participation in Student Loan Assistance Act passes. The proposed legislation aims to give employer student loan contributions the same beneficial tax treatment as employer contributions to 401(k) plans.
As for offering a student loan refinancing benefit, that’s something you can do at no cost to your organization. Refinancing allows borrowers to make lower monthly payments or shorten their payment term, and it saves them money on interest (sometimes a significant amount) over the life of the loan. You can also choose to subsidize a small interest rate discount as an added perk for employees.
Compete for talent in a hot market
Student loan assistance can help companies attract and retain talent at all levels, from recent undergrads, to higher level employees with MBA and grad degrees, to parents who’ve taken out student loans for their kids. One recent Bloomberg report found that 80 percent of surveyed individuals with student debt would like to work for an employer that assists with student loans.
“Refinancing my student loans made me realize that financial freedom was a possibility,” says Joe Lakier, who refinanced when his employer, Ernst & Young, offered the benefit through SoFi last year. “I went from looking at 20 years of payments to just five years, and easily saved $15,000 in the process.” Lakier notes that additional student loan assistance from his current or future employers would continue to be an attractive benefit to him, stating, “It makes a huge difference.”
Make other benefits more effective
While employer retirement plan participation rates are at an all-time high, a CNBC study from last year found that employees tend to under-utilize them. 1 in 4 employees don’t save enough to receive their full employer match, leaving $24 billion on the table each year. No doubt student loans have played into this under-saving trend—another survey found that 62% of student loan borrowers have put off saving for retirement because of their education debt.
When student loan payments become more manageable, employees are better able to take advantage of other employer financial benefits like 401(k) programs. Watching their retirement balance grow can go a long way to inspiring confidence and reducing stress, which helps support the goals of any financial wellness program. And frankly, what’s the point in offering these programs if workers are too bogged down with debt to take advantage of them? Share this retirement calculator tool with your employees so they can track where there savings are at and see if they are on track.
Employees who know they can handle both routine and surprise expenses, contribute to their children’s college tuition, and fund their own retirement will perform better at work. Furthermore, workers who feel like their employer cares enough about their well-being to offer a financial wellness program, will likely be more loyal to the company and more engaged with their jobs.
Ready to Take Action? Sign our Change.org Petition for U.S. Senate in Encouraging Employers to Help Pay Student Loan Debt with #StudentLoanBenefits