Debt is a leading source of stress for younger employees
It was once possible to obtain a university degree in the UK at no cost to the student. Then, in 1998, a tuition fee was introduced, but it cost just £1,000 per year and borrowers did not have to pay it back until they reached a reasonable level of income. After 25 years, any remaining debt was forgiven. Contrast that with today’s student loan burden. Just 20 years hence and the fee is now £9,250 per year (an 825% increase!) and the debt is not discharged for 30 years.The Institute for Fiscal Studies believes 83% of graduates will not fully clear their debts within three decades. At least after that time, the remaining debt is forgiven. Their counterparts in the U.S. are not so fortunate. Many U.S. employers are researching opportunities to make a positive impact and also create a powerful differentiator for their corporate employer brands among young, professional candidates.New benefits service companies are springing up to help employers develop and administer student loan repayment assistance programmes. Could this benefit be offered by UK employers?
Employer contributions to debt payments could be powerful recruiting tool for Millennials and Generation Z
The student debt shouldered by Millennials and Generation Z could have a profound effect on their mental stress levels and financial stability. It is estimated that that the poorest students will leave university with total debt around £57,000.With employer competition for talent—especially well-educated talent—so fierce, it is not surprising that many companies in the U.S. are moving quickly to establish a benefit programme likely to have strong appeal for younger candidates. UK businesses might prefer to invest elsewhere, leaving the unpaid student debt as a government problem.But multi-national corporations headquartered in the UK might want to consider such a programme for U.S. employees.
- A survey by SoFi, reported in Forbes, revealed that “95% of professionals under 30 with student debt would be more willing to accept a job if it offered student loan repayment.”
- American Student Assistance conducted a survey in 2017 of young workers with student loans and found 86% were willing to commit to an employer for five years if they received help in paying off their student loan debt. Millennials are notoriously frequent job hoppers, so this statistic should be a compelling argument for an organisation’s decision to offer a student loan repayment benefit.
7 tips for starting your own debt assistance benefit programme
- Make it easy for employees to participate.
- Share the burden. Employees should continue to make at least their minimum payments in order to have the employer contribute.
- Explain that employer contributions are a taxable benefit.
- Consider your messaging from the point-of-view of employees that do not have student loans or older workers that repaid their loans without assistance.
- Make the contribution structure easy to understand. Most organisations use just one flat contribution rate, rather than a tiered benefit. Keeping it simple will help you control the impact of this benefit on your budget.
- In terms of budgeting, be prepared for strong employee uptake of this benefit—possibly in the range of 20-35% participation if you have many young workers. Rise Interactive quickly saw 25% of employees enrol in its programme. One year after launching, Calabrio has more than 30% of US employees participating. Millennium Trust Company saw 20% participation in just a few months.
- Help employees (and potential recruits) calculate the impact of the organisation’s contributions. How much principal and interest will be saved? How many years may be cut off the loans thanks to the employer contributions?
After considering the potential impact of a student loan debt repayment benefit on recruiting, retention, and employee well-being, many organisations will probably seek to begin their own programmes soon. Asure’s Benefits Administration solutions allow you to streamline and efficiently manage all of your employee benefit programmes from the first day of work through an employee’s retirement.