June 6, 2018
PUBLISHED BY Amanda Eisenberg
Saddled with about $30,000 of student loan debt and lower wages than their parents were making at their age, millennials and Gen Z are forgoing traditional saving strategies to tackle existing debt.
The changing workforce demographic has created a new protocol for HR departments to follow, which includes updating the benefits package to resonate with younger employees.
The average debt-to-salary for 20 to 30-year-olds is 60% to 70% or higher — and this debt is stifling, according to Scott Thompson, the CEO of student loan reimbursement platform company Tuition.io. “As we explore the data here and we give that to employers, they’re beginning to understand the real true benefit” of debt relief programs, he says.
Although only 4% of employers currently offer student loan repayment benefits, according to the Society of Human Resource Management, that number is increasing.
Citing a 2016 Willis Towers Watson survey, Thompson estimates the percentage of employers that will offer this benefit will increase to 25% to 30% over the next year.
Companies such as Aetna, brokerage firm Crystal & Company and Estée Lauder Companiesare now offering about $10,000 in lifetime contributions to employees’ student loans. The monthly stipend is applied to an employee’s principal on the loan, which helps the employee pay off the loan faster and save on interest.
Companies look to student loan repayment providers like Tuition.io and Gradifi — the latter is used by Big Four firm PwC — to administer the benefit.
The benefit is not tax-treated, however, which makes it a difficult offering for the majority of companies to squeeze into their ever-growing benefits package.
That might change, however. U.S. Rep. Rodney Davis (R-Illinois) introduced the Employer Participation in Student Loan Assistance Act in 2017, but Congress has yet to act.
“Congress understands the size of the problem,” says Rob Reiskytl, a partner at Aon. “I think the difficulty is if you take action to enact legislation, it represents a tax loss.”
Read the full article on ebn here.