Student loan assistance may be gaining traction among employers as one of the benefits that they offer employees, but there are still questions about why and how to do it.
Ken Burtnick, Senior Product Manager at Paychex, recently sat down with David Aronson, Chief Executive Officer of Peanut Butter, to answer some of these common questions.
KB: Can you explain what student loan assistance is?
DA: Student loan assistance is an employee benefit program where companies offer eligible employees the opportunity to receive monthly contributions toward their student loans along with resources to help manage their student debt.
KB: Why are employers choosing to offer student loan assistance?
DA: Companies are looking to improve their employment value proposition to become an employer of choice among college-educated talent.
Many Americans cite paying off student debt as their #1 financial goal. But today, they’re on their own to do it. Our recent Millennial Benefit Preferences study found that when companies help their employees tackle student debt, they may be able to hire 13 percent faster, retain talent 36 percent longer, and enhance workplace productivity. It may even improve gender and cultural diversity, since women hold two-thirds of student debt, and African American college graduates are twice as likely as white graduates to carry student loan debt. Student loan assistance can be a unique financial incentive that companies use to engage these and other often-underrepresented groups in the workplace.
KB: Got it. When employers are evaluating student loan assistance options, what are the questions they most commonly ask?
DA: Executives first want to know: How many of my employees hold student debt? From there, they’re looking to understand how to structure and communicate a student loan assistance program. And of course, they want to know: what’s the ROI?
KB: Alright. Let’s dive into it. How can an employer know how many of its employees have student debt?
DA: Student debt is a real problem. There's a student debt holder living in most American households, and on average, someone with student debt is paying more toward these loans than to own a car.
For employers, the key is to understand how prevalent the student debt problem is across their company or in a particular segment of the workforce. Peanut Butter’s plan design process leverages data-driven analysis along with insights from our work supporting top employers to help management teams efficiently design student loan assistance programs that support their organization's talent goals, leverage best practices, and deploy capital in an efficient way. With a basic employee census file, Peanut Butter’s proprietary model can estimate the prevalence of student debt across a company.
KB: How should a student loan assistance plan be structured and communicated?
DA: Plan structure should be driven by your company’s goals and budget.
While most employers make the benefit available to all full-time employees, it’s not required. The flexibility in defining your eligible population can make implementing a program easier than you may think.
Is your primary challenge recruiting? Offer the benefit to new hires only. Are budget concerns leading you to think you can't roll this out? Consider restricting the eligible population by tenure, salary level, or role as a means to control the initial cost.
Contribution amounts vary and, again, should be driven by the employer’s talent and business goals. If you want to offer the benefit to all employees, you may need to contribute less. If you’re restricting the eligible population, then you may contribute more per month toward individual student loans. We provide benchmarking data to guide this decision, and ultimately recommend a contribution amount based on an organization’s needs.
Finally, you need to consider how to communicate the benefit to employees, recruits, and media. This will be driven by plan structure, and Peanut Butter’s experience in rolling out programs for employers of all sizes has helped businesses do this effectively.
KB: Are there any lessons you’ve learned that might help employers strategize on their student loan assistance plan design?
DA: The three best pieces of advice we offer to all employers when we help them with plan design are (1) Start low and grow; (2) Keep it simple; and (3) Remember that it’s all about the people. I shared more about each of these concepts in a recent Employee Benefit News titled Student loan program pays off for Rise Interactive.
KB: Alright, last question. How does an employer know how many employees are likely to participate?
DA: With a firm handle on your eligible population and communication strategy, a proprietary model can be used to estimate participation in your student loan assistance program, and provide analysis that includes both total cost and return on investment.
Our plan design process at Peanut Butter can help clients feel confident that they have a student loan assistance program that is uniquely designed for their company, goals, and budget.
Learn more about Peanut Butter.