Why Student Loan Repayment is the #1 Employee Benefit for Millennials
Did you know that there is a new kind of employee benefit, one where the company you work for will help pay off your student loans? With over $1.4 Trillion dollars* (that’s “Trillion” with a “T”) in student loans outstanding, it’s easy to see why student loan repayment assistance has become one of the hottest new employee benefits to emerge in recent years. This benefit is proving to be particularly valuable to millennial workers.
Quick Loan Repayment Provides A Better Future
Here’s how it works: employers agree to pay a set monthly amount – say $150 – for a number of years. The payment goes to reduce the outstanding principal, helping to reduce future interest. That means every month, employees see the balance of their loan going down. It’s a benefit that has a tangible, measurable impact on people’s lives every day.
Depending on the program, the principal pay down can reduce the overall life of an average student loan by 6-7 years! Considering it usually takes 20 plus years to retire student debt, this is a big deal. In addition, the accelerated repayment of principal reduces the interest expense over the life of the loan, saving hundreds and sometimes thousands of dollars.
Why is this the perfect benefit for millennials? First and foremost, it helps them solve a problem that is affecting their lives in profound ways. Many studies have shown that today’s young adults are postponing major life decisions like getting married, buying homes and having children due to the financial burden of student debt. This is a problem that impacts their lives TODAY in a big way, as opposed to making sure they save enough money for a retirement that is 40+ years away. According to a study by American Student Assistance, more than half of young workers report that paying off student loans comes first over saving for retirement.
Caters To The Millennial Lifestyle
Another key reason is that one thing millennials value most is their independence and freedom. They like the ability to travel, move to new cities, pursue different career paths. Student debt stifles their freedom and reduces their options. By speeding up the retirement of their student loans, repayment assistance can help them regain this financial freedom allowing them to lead the kind of lives they want.
For employers, adopting student loan repayment as a benefit shows that you “get” today’s young workers – you understand what they are struggling with and you are aware that they have taken on a real burden to obtain the education and qualification required to be a valuable part of your company.
Powerful Tool To Recruit and Retain Young Workers
Many millennials began their careers during the Great Recession, and saw how easily companies downsized and how quick many were to let go of long-tenured workers. Today’s young workers have come to accept that they are in charge of managing their own careers and professional development. Because of natural uncertainty, they’re more likely to entertain new opportunities when an existing one ceases to benefit them, labeling them as “job-hoppers”.
For employers, student loan repayment is a great way to retain millennials because, unlike promises of promotion or pay raises, it speaks to them in a way that is unlike other offerings. Because the benefits of student loan assistance is here and now, there are less strings attached, but yet employees regain a feeling of being valued – which builds greater loyalty and trust. Many companies, ranging from Fortune 500 stalwarts like Fidelity and Staples to innovators like Live Nation are starting to offer this benefit.
Recently, the City of Memphis became the first government employer to offer student debt assistance to its workers, showing that they understand the burden that their young employees face. For senior management as well as HR professionals, student loan repayment is an example of a benefit that is better calibrated to the millennial mindset. It shows you’re thinking about what you can do for them, not just what they are doing for you.
ContributorJen Bailey is Director of Business Development at Tution.io, the nation’s first and most comprehensive employer-funded student loan contribution platform. Lifting the burden of student debt is a personal mission for Jen, who graduated with $100,000 in student loans.