What Exactly Is Student Loan Refinancing? Why HR Professionals Need to Know
As an HR professional, you’re likely aware that many of your millennial and Gen X employees struggle with student loan debt. The average 2016 graduate has student loan debt of $37,172. Nationally, that debt is now over $1.4 trillion, which is more than the total credit card debt of all Americans.
Last summer, we surveyed 1,000 working professionals for The Impact of Student Loan Benefits, SoFi’s most recent white paper outlining the effect of student loan debt on employee recruitment, engagement, and retention. And what we found was telling: Employees want help alleviating the financial pressure of their student loan debt balances. In fact, just over 60% of respondents said that student debt is one of the top two most stressful financial burdens in their lives.
Luckily, student loan refinancing exists, and many millennial and Gen X employees are taking advantage of it. But what is it, and how does it help?
So what is student loan refinancing, and why do people do it?
Simply put, student loan refinancing is the process of getting a new loan through a new lender, which comes with a new, usually lower interest rate. If an employee has either federal or other private loans they borrowed to pay for school, they can choose to refinance them with a private lender, which can lead to lower interest rates, new repayment terms, and help graduates with student loan debt save money in the long run. (You can learn more about refinancing in SoFi’s student loan refinancing guide.)
In fact, people who have refinanced can hundreds of dollars every month, and tens of thousands in total over the loan term, which is why many employees with student loan debt are refinancing their loans. “There’s a growing awareness that student loan refinancing is an option, and more people—from recent graduates to parents with Parent PLUS loans—are choosing to save money by refinancing,” says Quinn Cohane, SoFi’s B2B Marketing Manager.
How student loan refinancing affects employees
Getting a handle on debt can make a big difference in an employee’s performance, health and financial well-being. After all, struggling to pay bills and meet other financial obligations takes a toll on workers: A 2016 survey of 1,600 full-time workers by PriceWaterhouseCoopers (PwC) found that 28% are distracted by finances at work, and 46% of those distracted spend three hours or more each week dealing with personal financial issues while on the job. That’s time that could otherwise be devoted to meeting project demands and connecting with coworkers and clients.
How HR can help by offering a student loan refinancing benefit
For employees struggling with student loan debt, employer-provided refinancing options mean they can get out of debt faster and reach their longer-term financial goals. And providing these options is simpler than you might think.
By partnering with SoFi at Work, you can empower your employees to better manage their student loan debt through our suite of resources and easy-to-use tools. Employees who enroll can either go through the process of refinancing their student loans entirely online, or they can connect with a SoFi team member, who can answer their questions all along the way.
“The refinancing benefit is a no-cost option, and it’s very simple to roll out,” says Cohane. “Employers simply send out a link to employees, and then SoFi handles it from there.”
Another way to help employees with student debt—employer loan contributions
Because a refinancing option may not apply to all student loan holders in your organization, student loan contribution benefits pick up where refi leaves off.
Here’s how it works: You determine who’s eligible, and then select your contribution frequency (most companies choose monthly) and amount. SoFi at Work takes care of the rest—we send each eligible employee an enrollment email, invoice your organization for the total contribution amount each month, and send payments to each enrolled employee’s lender.
What’s more, when your employees enroll in the contribution benefit, they’re automatically given the option to consider refinancing to save even more money.
“Your student loan contribution helps your employees pay down their loan even faster,” said Cohane. “If employees also refinance and lower their interest rate, they can see increased savings.”
Why student loan benefits are good for business
Offering student loan benefits can have some real upsides for employers, too, in terms of retention, recruitment, and engagement.
Partnering with SoFi at Work can help reduce employee turnover—a costly challenge for many organizations. Ninety-four percent of respondents to our survey noted above said they would feel encouraged to stay at their current employer longer if student loan contributions were offered. Moreover, 64% said they’d likely stay an additional five or more years.
Help with student loans is a very big draw for potential Gen Z and millennial recruits, as well. Ninety percent of the workers we surveyed said they would be more willing to accept a job offer at a new company if it included a student loan contribution benefit, and 71% said that such a perk would be the most or second-most meaningful benefit they could receive from an employer (behind retirement contributions).
“A growing number of employers now mention student loan benefits in their recruiting pitches to candidates,” says Cohane. “It provides a real edge when it comes to landing top talent.”
Another upside? Stress-free top performers will help you recruit additional A-list employees. Eighty percent of student debt holders we surveyed said they would be more likely to recommend a job with their organization to a friend or family member if that organization offered student loan benefits.
Charting a faster course out of debt for your workers can also clear the way to better engagement and performance. In fact, 100% of those surveyed for our report said they would either experience fewer distractions, more productivity, less stress, a more positive attitude, or gain a deeper commitment to their organization should they be offered student loan contributions as a benefit.
Helping employees tackle student loan debt offers significant returns for an employer. “When companies help to bolster employees’ bottom lines, they bolster their own, as well,” says Cohane.
By partnering with SoFi at Work to support employees with student loan debt, you light a path to financial wellness and keep your company competitive when it comes to attracting—and retaining—your best talent.
Connect with a member of the SoFi at Work team to learn how you can become a SoFi partner.