About 45 million Americans now collectively owe $1.6 trillion in student debt, and it’s a burden that is taking a toll on both workers and their employers.
A recent survey found that half of employees say they feel worried about student loan debt most or all of the time — and more than 65 percent say they have considered finding a second job to help them keep up with their loan payments. Another found that some 40 percent of borrowers believe student debt has stopped them from obtaining their career goals.
Employers should be troubled by these findings. They paint a picture of a generation of workers paralyzed by student loan debt, fueling unprecedented turnover at a time when the labor market is already tightening. About 40 million employees quit their job last year. And churn is even higher for millennials (now the largest generation in the workforce) which accounted for more than half of these separations.
But while employees are clamoring for help with student debt, just 4 percent of companies currently offer student loan assistance as a benefit. However, that may soon be changing, because early adopters are enjoying significant recruiting and retention advantages.
A survey of 500 millennial workers found that 86 percent of young employees say they would commit to working for a company for five years if the employer helped them pay off their student loans. Other research has shown that employees who receive assistance with their student loan debt are more likely to recommend that employer to other workers. According to SHRM, employers who offer loan benefits report an average retention boost of more than 80 percent.
The math is relatively straightforward: The average loan for recent college graduates is roughly $37,000. Which means a monthly employer supplement of just $100 can save an employee more than $9,000 in principle and $2,800 in interest — enabling them to pay off the loan 2.5 years faster.
Currently, the Employer Education Assistance Program allows employers to offer up to $5,250 in tax-exempt tuition reimbursement to workers who are seeking additional education. Student loan debt has, historically, been excluded. But last month, Senators Mark Warner, D-VA, and John Thune, R-SD, introduced bipartisan legislation that would expand those tax-exempt benefits to include student debt repayment. Business leaders should expect to see more of these kinds of proposals, as well as an increasingly greater demand for student loan assistance as a work benefit.
If and when the law is changed to allow employers to make supplemental payments toward their employees’ student loan debt, it will become a must-have benefit. An estimated 32 percent of companies are expected to offer student loan repayment to their employees by 2021. Companies would be wise to get ahead of this oncoming trend and assist employees in paying off their student loans.
Doing so can help employees improve their financial wellness, strengthen their bonds with their employer and ultimately thrive in their careers.
Patrick Donovan is a senior vice president at Bright Horizons. To comment, email firstname.lastname@example.org.