There’s one thing uniting many employees today: student debt. With the average graduate taking on $37,172 in student loan debt — more than some graduates make in one year of work — that figure stays front and center while they make financial decisions.
That means that while money isn’t everything when it comes to work, it takes on outsized importance. An inability to pay back student loans can result in losing the hard-won professional license that college made possible; the National Consumer Law Center notes many states tie licensing to student debt. Student debt can also lead to wage garnishments and impact security clearances; for employers who check candidates’ credit scores, loan payback can be a deal breaker.
OneWisconsin Institute found that those who graduate with a bachelor’s degree take just shy of 20 years to pay off their debt; those who earn graduate degrees don’t see an end to payments until the 23rd anniversary of their graduation. For at least two decades, employees have to take student debt into account when deciding where to work — and employers are starting to take notice.
Getting Behind to Get Ahead
People attend college to learn skills, earn credentials, and increase their earning power, but a college degree accompanied by student loans can actually sabotage those goals. “You wind up disadvantaged just as you begin. It has reduced the ability of our educational system to be a force for upward mobility, and for an equitable chance at upward mobility,” explained Melinda Lewis, an associate professor at the University of Kansas School of Social Welfare.
“It is still true that you are better positioned if you go to college,” Lewis says, “but you are not as much better positioned if you have to go to college with debt.” With Georgetown University’s Center on Education and the Workforce predicting that 65 percent of jobs will require postsecondary education by 2020, those facing the prospect of student loans are in a catch-22.
The Washington Post reported that student debt doesn’t just impact workers’ jobs; it also influences other life choices. Those saddled with student debt delay purchasing a house for a median seven years, and more than half had reported putting off starting a family or contributing to their retirement because of student debt. Employees who can’t accomplish major life goals are more likely to resent their employers or look for greener pastures — and neither outcome is ideal for employers in a strong job market.
Employers as Debt Partners
While incurring student debt — and determining how to pay it off — has traditionally been viewed as a personal experience, some employers are starting to recognize the ripple effect.
“One of the reasons that employers are taking notice is that student loan debt has a real impact on recruitment, retention and overall employee productivity,” explained Sangeeta Moorjani, head of workplace products for Fidelity Investments. “In the war for talent, solutions to address student debt can give employers a competitive advantage.”
Employees who take on additional jobs to pay the bills or put off obtaining additional education can become distractions for their employers, lacking the focus or credentials to make their companies competitive. And those who are constantly job searching for a better-paying role aren’t invested in their current jobs. In fact, an American Student Assistance survey found that 86 percent of employees would stay with their employers for at least five years if their employers helped them pay off their student loans.
Last year, the IRS issued a private letter ruling enabling employers to offer 401(k) matches alongside loan repayment assistance. More employers are seeking the same ruling, and the demand for employer-provided solutions has increased.
FutureFuel.io, a SaaS platform connecting employers, employees, and student loan servicers, is pushing to “crush” student debt. The platform, which has helped save an average of $19,000 per user via lowered interest rates, is offering employers one method of impacting employees’ debt burdens.
“Employers don’t have to sit on the sidelines while the industry gets organized — making a move signals empathy and offers an impact, and it helps employers stay relevant,” Laurel Taylor, the founder and CEO of FutureFuel.io, said. She explained that the platform signals bite-sized actions users can take and uses an algorithm to identify opportunities for users to refinance, aggregate, or round up purchases and apply the remainder to loans.
Will the Payoff Pay Off?
Some companies are already taking Taylor’s advice and getting in the game. Abbott, a pharmaceutical and medical products brand, launched a Freedom 2 Save program that empowers employees who put a minimum of 2 percent of their income toward student loans to receive a 5 percent match in their 401(k) accounts.
Others, like publisher Penguin Random House, reimburse employees for student loans; fintech company CommonBond offers unlimited $100 monthly loan payments. The latter, in fact, found that 78 percent of employees want their employers to offer some type of student debt relief. That indicates that those who are early adopters of student repayment programs will see a fairly immediate payoff in terms of morale and retention.
Student debt assistance will have long-term payoffs, too: Employers who help employees pay off their debt will put more money back in employees’ pockets and, in turn, back into the economy. That’s good for both employers and employees, whose success is ultimately connected.
Student debt may unite many employees today, but cutting-edge employers are looking to stop that trend. By helping burdened workers ditch their student debt, companies increase productivity, retain employees, and make themselves more attractive in a tight job market. Loan payback can be a deal breaker for employers, but a refusal to help may become a deal breaker for today’s employees, too.
