Is 2021The Year Of The Student Loan Benefits?

Increasingly, employees are turning to employers for assistance with their student loan debt

There has been a marked change in workplace recruitment and retention strategy and organizations are being forced to rapidly adapt. As employees begin coming back into the office, finding new roles during ‘The Great Resignation’ and looking for work that is more compelling to them, there is an increased focus on workplace benefits.

In speaking with employers across the country, we hear daily from employers about types of benefits that their workforce is asking for and finding relevant. Anecdotally, I can confirm there has been an increase in demand for student loan benefits from new hires and long-time employees. And, it makes sense. Student loan debt is a rapidly growing issue in the U.S. outpacing the rate of credit card debt. There’s now over 46 million loan borrowers with a total owed debt nearing $1.8 trillion.

Employees are turning to their employees looking for assistance with this growing debt that’s altering their ability to save for retirement, buy a home, and pay other bills. In a recent national survey from TIAA, it was found that nine in ten (90%) of respondents indicated a student loan benefit would be useful to them, with almost half (46%) indicating it would be “very useful.”

Another survey from Student Debt Crisis Center found that among fully-employed student loan borrowers, 89% say they are not financially secure enough to resume federal student loan payments on February 1. One-in-five (21%) say they will never be financially secure enough to resume payments again. As organizations compete with each other to secure top talent, it is imperative that they assess the holistic suite of benefits offered and can help employees feel financially stable in all facets of life.

Financial technology companies have stepped up to the plate to try and assist consumers and employers. According to Plaid’s Annual Fintech Effect Report, in 2021, fintech reached mass adoption. The percentage of U.S. consumers using technology to manage their finances jumped 52% year-over-year, from 58% to 88%.

With many startup companies and benefit offerings out there, here’s a few questions you may want to think through to better understand the full impact on the workforce at your organization.

Federal student loan debt is a constantly-changing ballgame with new policies being announced and changing often. Last December, loan forgiveness was made tax-free until 2025 and employer contributions to student loan debt are also tax-free up to $5,250/year.

More recently since the Biden Administration has taken office earlier this year, the pause on student loan payments has been extended twice and payments are now set to resume beginning February 1, 2022. Additional changes like expanded rules through October 31, 2022 for nonprofit and public workers seeking Public Service Loan Forgiveness (PSLF) were announced only a few months ago.

You’ll want to think about ways to best follow these updates and provide proper communication to employees, in order for them to best take advantage of savings opportunities.

Some benefits are easier to implement than others. Think about how easy a new service is to set up out of the box. Do you need assistance from your IT department to connect or launch a new online platform? Do you need to write your own communications to employees notifying them of this service? Are there tools that make reporting or paperwork easier for you as an HR representative?

Additionally, some benefits may be more costly than others. A service providing educational resources might be more cost-efficient than a service that will match a certain percentage of an employee’s monthly student loan payment. Knowing your target budget to start with, and knowing it can grow if successful, is also important.

Some benefits may help your employees by taking advantage of tax-free contribution matches to student loan payments after graduation while others may help match a tuition contribution before or while in school. Even others run the gamut of offering savings plans for employee’s children all the way to helping with applying for federal loan forgiveness after the fact.

Student loan debt is a pervasive issue that runs generationally in families and a ubiquitous issue that has multiple avenues of solutions. Thinking about where a priority is for your organization to start assisting your community with their student loan debt is essential to getting any new benefit program off the ground and running.

Interactive Survey: Student Debt x COVID Survey