The Workforce Is Buried in Student Debt and Needs Your Help
If you want the best talent working for you, there’s one sure way to attract them: Help pay down their student loans.
With $1.34 trillion in student loan debt hanging over the heads of today’s college graduates, young professionals find themselves unable to make the same financial commitments their parents were making at their age. Forty-nine percent of borrowers said they would choose a student loan paydown program over a 401(k) plan, according to a study conducted by IonTuition.
Professional services firm PwC began offering student loan paydown to its workers two years ago. The company pays $1,200 a year per employee for up to six years, which can shorten each employee’s payoff period by as much as three years.
PwC’s workforce has enthusiastically taken to the program, with 8,200 staff members signing up to date.
Young Professionals Worry About Their Financial Futures
While nearly half of younger employees would choose repayment over retirement, that doesn’t mean your organization needs to make them choose. To really set your company apart, try offering both paydown and retirement services.
“To attract top talent, it’s no longer enough to match the benefits your competitors are offering; you need to stand out and meet the evolving needs of your staff,” says Mike Fenlon, chief people officer for PwC.
That’s why PwC provides both a paydown program and a 401(k) to employees.
“We know they go hand in hand,” Fenlon says. “National student loan debt has reached a tipping point and is having secondary impacts on many professionals. It’s impacting when they are starting families, buying homes, and how they’re saving for retirement, too. By providing our student loan benefit, we are making saving for retirement through a 401(k) a possibility for our employees when it may not have been before.”
While employees certainly benefit from paydown programs, the employers offering such programs will see positive results, too.
“With less than 3 percent of companies offering a student loan paydown benefit to their employees, implementing a similar program is game-changing,” Fenlon explains. “It helps with recruiting, retention, and driving loyalty in ways that other programs do not. I would recommend it to any company hoping to enhance their benefit offerings.”
If you’re worried about how employees who don’t need the benefit will react, don’t be.
“We talked about the possibility we might get negative feedback from employees who do not have debt, but to our surprise, we did not experience it at all,” says Fenlon. “In fact, we’ve even heard from employees with no debt that they feel proud of the pioneering benefit. They are proud that the firm is taking on such a complex, important issue in our society, especially one they see negatively affecting their friends, family, and colleagues”
Top 3 Tips for Rolling Out a Paydown Program
It’s important to do the necessary legwork in advance to minimize complications and ensure that the paydown program you implement is the best option for your workers. Fenlon offers the following tips for other companies considering student loan paydown benefits:
- It needs to be easy: “Employees responded favorably to an arrangement that limited the amount of work they had to do. PwC pays directly to the loan servicer through a third-party vendor, so that staff does not have to handle the payment each month. It’s seamless, and staff tell us they love that.”
- Clearly outline the pros and cons: “At every step, we wanted our staff to understand the ins and outs of the program. For example, our benefit payments are taxable income, so we make sure our employee know how that can affect them before they sign up.”
- Prioritize feasibility and impact: “Companies should have an honest conversation to find a monthly payment that is large enough to genuinely help the employee, but reasonable enough to make the benefit possible for the employer. At PwC, we pay $100 per month.”
With this advice in mind, executives should be equipped to begin exploring loan paydown programs for their own companies. In the age of job hopping, offering benefits that appeal to the needs of workers can be crucial to ensuring longevity and productivity. If you don’t offer this benefit, chances are your competitors eventually will. Don’t get left behind.