Attacking Student Debt with Employee Loan Repayment Benefits
Student debt is a big problem in this country. Today’s students are graduating from college with seemingly insurmountable volumes of debt hanging over their heads. That debt can take decades to repay. And with every graduating class, the total amount owed climbs. Some employers are fighting back by offering employee loan repayment benefits.
Companies are always looking for ways to expand their benefits packages in order to compete for top talent, explains Dallas-based BenefitMall. One of the hottest benefits right now, according to BenefitMall, is the employee loan repayment benefit
Just 8% of America’s employers offer such a benefit right now, according to the Central New York Business Journal. They recently published a piece detailing NBT Bank and its new loan repayment benefit. NBT Bank chief HR and ethics officer Catherine Scarlett said that her employer’s decision to help workers with their student debt was the “right thing to do.”
Trillions of Dollars in Debt
Well-known financial expert and media personality Dave Ramsey point to statistics that show student debt now exceeds $1.6 trillion. Ramsey says that the volume of student debt has grown by more than 150% since the Great Recession. He also says it is the fastest-growing type of debt for American households.
There are some 44 million people who owe some form of student loan debt in the US. Furthermore, the average amount owed at graduation is about $35,000. Ramsey says that 65% of all students graduating from not-for-profit schools in 2017 graduated with debt.
The last statistic is vitally important in this discussion. Let us reiterate: 65% of all students graduating from not-for-profit schools in 2017 did so with debt hanging over their heads. These not-for-profit schools are, by and large, state schools. This is important for the simple fact that the student debt problem cannot be blamed on for-profit schools demanding excessive tuition. It is a systemic problem that exists throughout higher education.
What Employers Are Doing
People like Dave Ramsey are pitching in by educating consumers. They are teaching families how to solve the equation of paying for higher education without incurring massive amounts of debt. Doing so is entirely possible, but it requires discipline and knowledge.
In the meantime, employers are starting to pitch in as well. They are beginning to offer loan repayment benefits that combine their financial resources with those of their workers to get student debt paid down as quickly as possible. Best of all, student loan repayment benefits are highly customizable.
One popular method for offering such a benefit is to structure it like a 401(k) plan. The benefit requires both employer and employee to make regular contributions with every payroll run. Some employers offer dollar-for-dollar matching contributions while others offer a flat amount.
Employee contributions are deducted from paychecks, combined with employer contributions, and paid directly to creditors. The benefit is reported alongside any other benefits the company offers. It is all pretty straightforward.
Helping Out and Creating Loyalty
For employers, a student loan repayment benefit is a win-win. A company with the financial resources to offer such a benefit would come up with something else if they didn’t settle on a student debt repayment program. As long as they are investing the money in benefits, they might as well help attack the student debt problem.
Every such benefit represents an opportunity to help out. Additionally, employers create loyalty among their employees by taking a personal interest in helping them solve their debt problems. Combine a student debt benefit with an overall financial wellness program and the employer hits the proverbial ball out of the park.