Student Loan Assistance Programs: Key to Post-COVID Recruitment and Retention?
The global public health crisis and resulting period of ongoing remote work should be making employers rethink their approaches to recruitment and retention. Moving forward, workers’ geographic locations will be much less of a barrier to employment in comparison to pre-pandemic days, affording them more choice among prospective employers.
One of the ways employers can distinguish themselves from their competitors in the talent market, particularly in the eyes of younger workers, is to offer competitive student loan assistance programs. These programs will prove especially valuable among recent college graduates who are in the early years of paying off student debt.
Prudential’s 2020 Financial Wellness Census, a biannual study exploring US adults’ objective and subjective financial health, found that the burden of student debt cuts across racial lines. For example, while only 15 percent of the general population noted they had student debt for either themselves or a partner, 20 percent of Latino Americans and 26 percent of Black Americans surveyed said the same.
For 2020 grads making their first payments on federal student loans this year, the typical six-month grace period following graduation was pushed from November 2020 to January 2021 due to the pandemic. However, that is not necessarily the case for non-federal loans, which may already require repayment or may be coming due soon.
As more employers seek to gain a competitive advantage in a volatile talent market and bolster retention through student debt assistance, organizations can implement the following three-step action plan to enhance their own employee retention and recruitment efforts:
1. Recognize That 21st Century College Graduates Face a Difficult Path to Financial Wellness — Now More Than Ever, Thanks to COVID-19
The results of Prudential’s Financial Wellness Census underscored the devastating impact of the COVID-19 pandemic on individual paths to fiscal resilience. The impact on millennials proved particularly bleak. For example, the census revealed that 21 percent of millennial respondents underwent a 50 percent or higher decline in household income stemming from COVID-19. Furthermore, 52 percent of millennial respondents reported they were concerned about what the future held when it came to their finances.
The impetus is on employers to acknowledge the especially difficult path younger workers, particularly recent college graduates, must navigate to achieve financial wellness and security. Those organizations that recognize the tough path to financial stability, which too many workers face as a result of the coronavirus’ economic impact, will demonstrate that they are in touch with the financial obstacles employees are grappling with amid this volatile environment.
2. Incorporate Student Loan Assistance Into Your Benefits Packages
The Financial Wellness Census also found that respondents were worried about their ability to pay off debt, underscoring the importance of student loan assistance programs as part of a holistic benefits package. For instance, the census revealed that respondents’ concern about paying off debt varied by their annual income bracket, with worry going down as income levels go up:
- Less than $30,000: 44 percent
- $30-50,000: 37 percent
- $50-80,000: 36 percent
- $80-100,000: 35 percent
- $100,000 or more: 27 percent
These data points demonstrate why employers that incorporate student loan payments into benefits packages will help minimize employees’ financial woes and, in turn, enhance employee recruitment, retention, and engagement. The pandemic’s impact on both working arrangements and employee financial wellness will only continue to underscore the importance of student loan assistance programs as part of a comprehensive employee benefits package going forward.
3. Bolster 401(k) Plans With Automatic Enrollment
Employers’ actions speak volumes about their commitments to helping workers shoulder the financial burdens they may be carrying. Mere recognition of the challenging path to financial wellness is not enough for an employer to gain an employee engagement, retention, and recruitment advantage.
Bolstering 401(k) plans with automatic enrollment is one of the most impactful steps employers can take to help ensure the financial wellness of their employees. Employers should encourage employees to start saving for retirement as much as they can and as early as possible because of the power of compound interest. Even for those paying off student debt, small amounts — like $10 or $20 per pay period starting in someone’s early 20s — will go a long way, especially if the employer offers any kind of 401(k) match. By offering automatic enrollment, employers ensure that new workers must elect not to participate in this powerful benefit.
Automatic enrollment ensures that employees who are in a financial position to pay off student debt while also contributing to their 401(k) plans can do so as easily as possible. This ease of enrollment will encourage workers to take advantage of, rather than put off, such critical preparations for their retirement years.
Jim Mahaney is vice president of strategic initiatives at Prudential.