Top 5 Reasons Why Employers Should Offer Employee Student Loan Repayment
Student loan debt is at an all-time high, quickly surpassing $1.5 trillion and continuing to grow every year. As a business owner, you likely have an employee or two struggling to pay their debt.
Student loans are a massive burden for many people, and often, the only way to pay them off is by waiting until they have a well-paying job. However, this doesn’t mean that they have to wait until then before they can start paying it off at all—it just means that they have to find other ways of doing so in the meantime. One option? You, the employer, might be able to help out with supplemental contributions toward your employee’s student loan repayment! Here are 5 reasons why employers should consider offering an employee student loan repayment benefit.
1. Employee Retention
Retaining employees is a top priority for many companies, especially in the competitive job market. These days, employees are more likely to look at factors like benefits and culture when deciding whether or not to stay with a company.
As it turns out, employee retention can be greatly improved by offering student loan repayment benefits as an after-tax benefit. Employees who have student loan debt are more likely to leave their jobs due to financial obligations than those without student loans, according to Credible's report on employee attitudes toward student loans.
Employers also benefit from offering this type of benefit. It increases loyalty among workers by their employees who feel appreciated and valued by their employers. Attracts high performing talent that may otherwise go elsewhere due to lack of financial support. Reduces turnover costs (e.g., training new employees). Identifies you as an employer that cares about its employees' well-being beyond just compensation packages.
Employers should offer student loan repayment benefits to help attract top talent and demonstrate that you care about your employees. These benefits are also an alternative to 401(k)s, which have become less popular as individuals move away from traditional retirement plans.
A study done by the National Association of Colleges and Employers found that 52% of employers plan to offer student loan repayment benefits in the next two years. This is a significant increase over previous years: In 2017, only 27% reported offering these perks; in 2016, it was just 14%.
And these numbers are likely to continue growing rapidly as more companies realize how valuable it is for them to help their workers gain financial wellness by paying off their debt faster.
3. Tax Benefits
One of the biggest benefits of offering a student loan repayment program is the ability to leverage new tax advantages and offer the hottest new benefit.
Employer student loan assistance is tax deductible to employers, but only if they are eligible for the deduction. The Internal Revenue Service (IRS) has guidelines for determining whether or not your company qualifies for an employer student loan repayment plan.
4. Financial Wellness for Millennials
As a millennial, you're more likely to have student loan debt than other generations. According to the Federal Reserve, millennials hold $1.5 trillion in outstanding student loans; this is more than twice what baby boomers owed at the same age. Millennials are also less likely to own homes and have higher levels of credit card debt as well as greater access to alternative financing options (like payday loans). It's no wonder that many millennials feel financially stressed!
Millennials have a lower net worth than previous generations did when they were young adults. Although this trend could be reversed if millennial wages continue rising and inflation stays low, it's evident that there's still room for improvement here—and employers can help by offering employee student loan repayment as part of their benefits packages.
5. If you want to retain or recruit top talent, offer student loan repayment assistance.
As the economy improves, millennials are looking for new jobs as they move on from their college careers. And if you want to keep or recruit top talent, offering student loan repayment is one way to do it.
Employers can help their employees pay off their student loans in a tax-free way through a program called the Employer Education Assistance Tax Credit. The program gives employers a dollar-for-dollar reduction in payroll taxes—up to $5,250 per employee per year—for up to five years. That's money that could otherwise be put towards your own retirement savings plan or daily spending needs, but instead goes right back into helping your employees get ahead financially!
Student loan repayment is a great way to attract and retain employees. It is also a win-win situation for both employers and employees. The employer will get loyal employees who are happy with their work environment and the employee will have financial freedom.
With Paidly, employers can pay supplemental student loans at the frequency of their choice once a year, twice a year, quarterly. This flexible payment option helps employers save thousands of dollars. Get started today with on-demand payments.
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