As a member of the Baby-Boom generation, I was able to graduate from college debt-free thanks to reasonable tuition, part-time jobs, work-study and more than a little help from my father. For Millennials (those born between 1980 and 1995) and Gen Z (born between 1996 and 2010), stories from dad or grandpa of a debt-free graduation sound fairly incredible. According to US News and World Report, 69% of graduates leave college with average loans of roughly $30,000 or more.
Student debt is now the second largest liability on household balance sheets after the home mortgage — bigger than all car loan debt, credit card debt and home equity loans. Some economists observe that this burden leads young adults to delay starting families, buying homes and saving for retirement. And, it certainly creates a financial worry for young adults that inevitably leads to some level of stress, affecting overall well-being.
An opportunity for employers
With Millennials now representing a key — and growing — workforce cohort, employers are becoming sensitive to their debt burdens. As employers compete for talent, student loan assistance is seen as a way to modernize benefits to respond to an urgent need. Some savvy employers are looking inward at their standard benefit offerings as a means to attract and retain talent affected by heavy student debt. For example, programs we’ve seen include:
- Student loan counseling
- Student loan consolidation
- Student loan repayment matching
- Student loan repayment assistance
While still very new, some programs include employer match after a service requirement and the maximum benefit ranging from $1,000 – $5,000. We’ve also seen plans that are looking at how to redirect employers’ 401K match toward student loan accounts. Some employers even provide assistance toward parents of students, providing a match toward 529 contributions.
Employers see numerous value-added reasons for exploring and potentially implementing student loan programs of some type because they:
- Support employers’ broader financial well-being efforts, including commitments to overall health and well-being of employees that can lead to higher worker engagement and productivity
- Enable employers to address a broad social concern that’s not going away anytime soon and create a message they can incorporate into recruiting and retention efforts, as well as their Employee Value Proposition (EVP) (this can be viewed as a key differentiator in attracting and retaining younger workers)
- Provide both value and benefit to the many employees who lack full understanding of their debt obligations
- Are simple to deliver through a variety of third-party vendors that have emerged to support and execute employer efforts
- Infuse a halo effect and general brand lift to the whole organization, so they benefit and attract even those without student debt
Not surprisingly, younger generations are particularly drawn to student loan assistance programs. Programs can be offered as a distinct benefit or as part of a choice design that allows an employee to select from a variety of options, such as a 401(k) match or student loan repayment.
While new and evolving, student loan assistance programs can be a high-value addition that responds to an emerging and significant workforce need. Given the generational workforce shifts, these programs present an opportunity for employers to compete for talent in a new way.
When my Dad went to college, tuition at public universities could be $50 per credit. Those days are a distant memory. Employers recognize the huge debt of many of today’s graduates and for those seeking to improve their brand to younger generations, student loan assistance programs can be a key element in updating benefits to meet the needs of a new workforce.