Organizations that help workers eliminate student loan debt earn a greater payoff: increased productivity, loyalty, and retention.
By Michael Fenlon
With outstanding student loan debt at a national high of over $1.3 trillion, more than 44.2 million Americans are burdened with student loan debt. Along with increased stress, debt is having secondary impacts on many professionals and affecting when they are starting families, buying homes, and how they’re saving for retirement. These obstacles have a negative impact on overall workplace wellness by decreasing productivity, leading to disengagement, and even undermining physical health.
Companies must recognize that the needs of staff evolve over time, and the workplace must transform to meet them. It’s no longer enough to match the benefits of competitors -organizations need to stand out and demonstrate an understanding of what is important to the workforce. And helping to alleviate the stress of student loan debt is clearly important to millions of workers. In fact, according to PwC U.S.’s 2016 Employee Financial Wellness Survey, 42 percent of millennial respondents have a student loan, and 79 percent report their debt has a moderate or significant impact on their ability to meet their other financial goals.
However, according to a 2017 employee benefits survey from the Society for Human Resource Management (SHRM), only 4 percent of companies in the U.S. offer to help employees with student loans.
In September 2015, PwC began offering the benefit of $1,200 a year for up to six years to help associates and senior associates pay down student loans. Internal research on the benefit found it will reduce participants’ loan principle and interest obligations by as much as $10,000, and shorten their payoff period by up to three years. Since implementing the program, 8,200 of PwC’s employees have signed up for the benefit and that number only continues to grow.
Leaders at organizations are beginning to understand how offering a student loan paydown benefit to employees can be game changing it helps with recruiting, retention, and driving loyalty. Companies should embrace the opportunity to positively impact their people, while also providing leadership for their industry in solving a major societal issue.
Prior to rolling out a student loan paydown benefit, careful research and much discussion will help determine the appropriate amount to pay over time, and how it should be offered to staff. Some other best practices for companies considering offering a student loan paydown benefit:
- It needs to be easy. Employees will respond favorably to an arrangement that reduces the amount of work needed to become enrolled. A good option is payment directly to a loan servicer through a third-party vendor. It’s seamless so that employees don’t have to handle the payment each month.
- Clearly outline the pros and cons. Student loan repayment is difficult for some to understand, from how long it will take to pay back to what the interest rate is. To combat that confusion, information about the student loan paydown benefit needs to be easily accessible, ensuring staff understand the ins and outs. For example, student loan benefits are currently taxable income, so companies should make sure employees understand how that can impact 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 employees, but reasonable enough to make the benefit possible. Before launching the program, companies must consider what the eligibility requirements will be, the frequency of payment, and caps on total benefits. For PwC, staff is not required to meet any kind of threshold in terms of years of service to qualify, nor will they have to pay back the benefit if they leave before a certain point.
- Offer resources to build financial literacy. Americans are increasingly facing financial stress, not only because of student loan debt, but also because of rising housing costs and more. For student loan paydown to be successful, companies should consider a broader employee financial wellness program. Employees often lack the information they need on how to best manage their finances, so consider offering financial information and counseling, especially as it relates to paying down student loans. Placing this emphasis on financial wellness will help reduce stress so workers can better focus on their job and feel fulfilled while they are at work and at home.
The problem of student debt is enormous and tackling it will require great effort. Offering it as a benefit option is a forward-thinking way to help.
SIDEBAR: Spotlight on PwC Employee Elaine Florentino
In 2015, Elaine Florentino graduated from Bentley University with an undergraduate degree in accounting, a master’s in taxation, and $57,000 in student loan debt. Florentino would devote $451 every month to paying off her loans. Even with her high monthly payments, she expected it would take her 10 years to pay off the debt, and that, with interest, she would ultimately pay a total of about $80,000 to her lender. As an associate in assurance services at PwC, Florentino decided to enroll in the student loan paydown benefit program, a part of the overall benefits package. For Florentino, the program will help her pay her loans a year early, with a savings of at least $8,000.
Michael Fenlon is the Chief People Officer of PwC.