Employers need to consider the benefits of student loan assistance

Student loan debt has become a key component of the broader financial wellness conversation, and employers are beginning to realize the value of offering a benefit that will help employees get a handle on the latest U.S. debt crisis.

Yet employers are still falling behind on the work that needs to be done as just 8% of U.S. employers offer their workers a student loan repayment benefit, versus 4% in 2018, according to the Society for Human Resource Management. The costs associated with higher education have outpaced inflation on all fronts, says says Lydia Jilek, director of voluntary benefits at Willis Towers Watson, and it is becoming harder for those with student debt to manage all of their financial responsibilities.

“We have a lot of people coming out of school with a lot of debt,” Jilek says. “We don’t have a financial education in place in high school for people to understand what a $30,000-a-year education looks like.”

Nearly two-thirds of young adult job seekers have student loan debt — with an average balance of $33,332, according to data from the American Institute of CPAs. The national student loan balance is over $1.5 trillion, according to the Federal Reserve.

Jilek spoke recently about what more employers can do to help combat this issue.

Why are so few employers offering student loan benefits?
Part of it is that when you start to put hard dollars to an employee’s student loan debt, you start to get into real numbers and real money very quickly. So if you think about an employee population that may have student loan debt, you have to consider how you’d segment the population and determine if you’re going to offer the program to all employees or just a cohort of employees.

Employers have to figure out what a benefit of $100 could mean, when you don’t necessarily have a very good understanding of the number of people who could be taking advantage of the program. But, if employers limit the program to a specific population of employees with a specific degree or type of job, then you’re able to do that more cleanly. But for many employers, unlike a 401(k), you’re not necessarily able to cleanly do the math on student loan debt benefits.

There is also some concern from a taxability standpoint, but this is really no different than a signing bonus from an employee taxability perspective.

What about the employees who don’t need student debt help?
There will be a little bit of a “what about me?” concern that employers are going to have. But that’s easily overcome in that there are plenty of other benefits on the health and wellness side that are applicable only to certain populations, such as enhanced parental leave. Just because something is really good for one population of employees, doesn’t mean it is a negative for the other population.

Should all employers offer a student loan benefit program?
I spend a decent portion of my time talking to employers about student loan programs and the opportunities that they have to roll them out. I start by asking why the employer wants to have the conversation in the first place. I need to know if this is something that has come from the leadership team or something that has bubbled up organically from recruiters, new hires or other employees within the organization.

As an adviser you need to ensure that if your clients do engage in the vendor search and implement a program that they are doing it wisely. For employers, it’s possible you may find that your employees are relatively current on their student loans and their balances are not significant compared to other things. The greater issue you may find is that people are delinquent on mortgages. Then the question becomes: Are there other programs you can utilize to assist the employee population from a budgeting standpoint?

There are vendors in the space who are able to help with some of these analytics by looking at the employee population very broadly to understand what their specific needs are.

Make sure that as an employer you are thinking about what things are going to be most impactful for your employee population.