By Keisha Ward, courtesy of SBAM Approved Partner ASE
In the past, companies were able to offer college graduates a decent job consisting of a few weeks of vacation, healthcare benefits, and a 401(k) plan. Today, the needs of new college graduates are unique and to attract them, companies must consider evolving their plans.
It is wise for companies to use their benefit plans as a marketing tool to attract strong employees, especially recent graduates and Millennials. According to research conducted by Pew Research Center, in 2017, 56 million Millennials were actively working or seeking employment, which is an increase of 3 million workers compared to Generation Xers.
Like everyone else, these candidates are intrigued by the prospect of a generous benefits and 401(k) plan; however, due to their circumstances, the most educated generation in history faces an excruciating amount of debt. Society deemed it necessary for them to obtain a college degree for gainful employment and as a result, they seek assistance from the same companies who require these degrees.
The answer is clear. To attract graduates, companies should be willing offer student loan repayment as a part of the benefit plan. These high performers want and need assistance paying off their looming and now record-breaking student loan debt. According to the Department of Education, more than 44 million college graduates are responsible for paying back an astounding $1.4 trillion in loans. That means Millennials are starting their first job carrying nearly $30,000 in debt. This also points to the common misalignment on salary expectations and job level among this group. It has been proven that Millennials are willing to take less pay for these benefits.
Some U.S. companies are already implementing student loan repayment programs to recruit workers. Implementing student loan repayment or other programs that surround tuition relief can also peak the interest of a cross-generational workforce. Considering options such as scholarship programs or other opportunities for their college age children would be a start.
According to Forbes.com, Fidelity Investments estimates that approximately 25% of its employees have student loan debt, and to ease the financial burden caused by student loan debt, companies such as Fidelity offer employees that have been with the company for six months or more $2,000-$10,000 a year toward their student loans. Other organizations are offering employees $1,200 a year towards their student loan debt.
The way most programs work is that employers make a regular contribution to the loan balance, typically $100 a month, while employees continue to make their regular payments. Employees save money on both the balance and the interest they would have paid on a longer loan term. Unlike tuition reimbursement benefits, however, which are tax-free below a certain amount, the employer’s loan contributions are considered taxable income.
These programs offer a way for companies to expand their recruiting pool and improve diversity within their workforce. Recent surveys have shown that workers with student loans are willing to commit to their employer for an extended length of time – some more than five years in exchange for debt assistance.