The number of Americans owing money for sizable student loans has soared to 45 million — a 116 percent increase over the last decade.1 For employers hiring newly minted college graduates burdened with loan debt, this is an opportunity to attract and retain the best employees with benefits that help reduce college loan repayment.
There are many reasons, in fact, why more employers are rolling out effective programs to help employees reduce student debt:
- Borrowers stressed about student loans are less productive2
- Reduces new-hire employee turnover by 80 percent2
- Helps recruit new employees3
- Results in happier, more motivated employees3
Additionally, large student debt squashes economic growth when employees struggle to buy homes and cars or even pay for health insurance.4 What's more, student loan reduction programs can quell distractions at work and take the pressure off employees who must moonlight to pay the bills.3
Other benefits for employers and employees
Loan benefits can also help create a more diverse, inclusive workforce. Black students typically owe $25,000 more in student loan debt than white graduates. Which means, student loan benefits can help companies close diversity gaps and support marginalized workers meet significant milestones in their lives.5
And when workers receive help from employers to help pay down student debt, it has profound positive effects on their retirement savings:2
- Employee retirement plan participation increases by 7 percent
- Employees increase retirement contributions by 13 percent
- Retirement plan balances increase by 6 percent (across the entire employee population)
How student loan assistance programs work
Through typical student loan assistance programs, an employee’s debt is reduced by an average of $6,500, or by nearly 20 percent – and the duration of loans is reduced by approximately five years through student loan assistance programs.2
The Coronavirus Aid, Relief and Economic Security (CARES) Act, signed into law in March 2020, temporarily allowed employers to provide up to $5,250 in tax-exempt student loan repayment contributions or tuition assistance from March 27, 2020, through December 31, 2020. However, a new law has now extended this provision to the end of 2025.
This means an employer can make up to $5,250 in student loan payments per employee each year. The payments can be made directly to the employee or the student loan servicer. The money is considered tax-free, so neither the employee nor the company pays taxes for the money applied to student loan payments.
Securian Financial’s CommonBond for Business
Securian Financial offers a very competitive student loan assistance program through CommonBond for Business™. To understand the impact of student debt on the employee population, CommonBond provides an analysis using a financial wellness diagnostic tool that analyzes employees across age, income and tenure.
The suite includes:
- Employer contribution platform: Enables employers to make financial contributions to help pay down employees’ student debt.
- Student loan evaluation tool: Robust education tool provides personalized recommendations to employees seeking options to manage student debt better.
- Student loan refinancing: Allows employees to lower interest rates on existing student debt, lower monthly payments or both.
- Smarter student loans: Offers low-interest loans to finance new education, either for employees or their college-aged children.
With HR leaders focused on delivering better and more comprehensive financial wellness benefits to attract and keep the best employees, student loan assistance programs should be a cornerstone of the most competitive benefits package.