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5 Reasons Why College Savings and Student Loan Assistance Should be Part of Every Employer’s Benefits Package
Monday, July 20, 2020
A new star has emerged in the employee benefits space. Fueled by the growing crisis of higher education expenses, college savings and student loan repayment benefits programs have grown increasingly popular in the past years, falling into line among the most in-demand employer offerings on the market.
This begs the question: Why should employers consider joining the movement and how can they make a difference? Read on for the top five reasons.
1. Employers are key to breaking the intergenerational cycle of student loan debt
Student debt and the rising costs of higher education are a huge burden on young people. However, the conversation about millennials and debt often overlooks a stark reality: yes, 37.5% of student loan holders are under 30 -
are over 30, according to the
U.S. Chamber of Commerce
. Simply put, student loan debt impacts employees of all ages and backgrounds.
Without adequate support, employees can become trapped in a vicious cycle of student loan debt - preventing them from achieving other critical financial goals and milestones.
Beyond this, if employees have children, they may not know how to most effectively save for future education, replicating the cycle of student debt for the next generation. The workplace is the ideal place to provide education about and access to tax-favored 529 college savings plans (which nearly 70% of Americans lack awareness of). These savings vehicles can transform a family’s financial wellness by helping them to plan ahead for college costs a little at a time and avoid the crushing weight of student loan debt. The results are impressive: research from ISS Market Intelligence shows those who save through payroll deduction, rather than automated savings from a bank account, save on average 75% more.
2. Employers are needed now more than ever
In the past 10 years, the cost of a college degree has increased by
more than 25%
, and trends show little signs of slowing. In the 2019-2020 school year, tuition and fees for a private college
. Unfortunately, wages have not caught up. In fact, reports show that the price tag of higher education is growing nearly
eight times faster than wages
Despite this growing gap between income and education expenses, many employers require some level of higher education just to get in the door. With increased competition in the job market, young people have little choice but to take on student debt in order to achieve their future ambitions.
With each successive graduating class carrying a heavier financial burden, the next generation of employees and leaders urgently need support. Ultimately, the student loan crisis, like the question of retirement, will be solved in the workplace.
3. Support with higher education costs benefit both employee and employer, and help to set employers apart
Educational benefits are a win-win, empowering employees to reclaim their financial freedom while enabling employers to recruit and retain top talent. In our 2020
Paying for College Survey
, 75% of Americans rank 529 college savings and student loan benefits amongst the top three desired employer benefits overall. According to
American Student Assistance
, 86% of employees report that they would commit to a company for five years if the employer offered student loan assistance. Accordingly, offering these benefits can help with both recruitment and retention by setting you apart from the competition.
Beyond recruitment and retention, educational benefits also have a positive impact on an employee’s wellbeing and productivity. In our survey, 62% of respondents reported feeling overwhelmed by their student debt. Employers providing student loan support observe reduced employee stress, improved employee satisfaction, and increased productivity, according to a recent survey from the
Employee Benefit Research Institute
4. Employers’ options are flexible and customizable
Student loan debt and rising college costs have a wide impact across the workforce. However, we know that no two financial situations are quite alike - and different businesses require different benefits programs. To meet the needs of both employees and employers, educational benefits can offer a wide range of flexibility and customization.
For example, through Gift of College At-Work employers can implement a program that is as simple as offering gift cards (available in denominations of $25 and up and redeemable into most any 529 college savings plan or student loan account) as part of a rewards and recognition or new baby program. Alternatively or in addition, through Gift of College At-Work employers can offer payroll deduction with an optional employer match to student loan and/or 529 accounts. Within this spectrum, employers can choose a program that is best suited to their needs and to their employees’ priorities and be confident that implementation will be simple and streamlined.
Of additional appeal to national employers, with the Gift of College At-Work platform, it is the employee (versus the employer) who picks which 529 plan to contribute to, making it easy for employers whose businesses across state lines.
5. There has never been a better time to set up a program and to make an impact
Families are top of mind for employees as they spend increased time together during this period of social distancing. Offering a forward-looking, family-oriented benefit like access to 529 college savings plans would be a much-appreciated gesture at this time. And the time is right for student loan support as well. To help employees better access student loan relief, the CARES Act offers an expansion of the rules under Educational Assistance Programs (IRC Section 127) to help employers ease student loan debt by creating a tax break for employer-paid student loan benefits of up to $5,250 per employee per calendar year. Between now and December 31, 2020, employer contributions to employees’ student loans are a tax-deductible business expense for the employer and are tax-free to the employee.
This change creates the most favorable conditions to date for companies to implement or expand educational student loan benefits programs. At a time when both businesses and employees are closely watching their budgets, the CARES Act has opened the door to a mutually beneficial and highly accessible solution for student loan debt.
Well before the pandemic and the economic insecurity that have defined 2020, educational employee benefits spoke to an immediate and growing need among employees to fight back against the rising costs of college. Today, there has never been as great an opportunity for employers to make a difference in the lives and futures of their team. Learn more about implementing a program with
Gift of College At-Work
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