Generation Z has hit the workplace in full force. According to some estimates, Gen Z, or “nexters,” make up about 20 percent of the global workforce. That number is even higher for entry-level positions. (You know, the positions you most often need to hire people to fill.)
Nexters bring a number of new dynamics to employment situations. In particular, they have different expectations of their employers than their older colleagues do. They are more likely to accept a job for its perks rather than its salary.
So how can employers design a job offer package to attract these talented young professionals? Simple. Offer perks that address their unique needs.
More than 77 percent of employees say that student loan assistance programs are important to them when considering a job offer.
Nexters are entering the workforce with more student loan debt than any past generation. So it stands to reason that student loan assistance programs would top their list of desirable employee perks.
According to a Student Loan Hero survey, more than 77 percent of employees say that student loan assistance programs are important to them when considering a job offer. This includes 21.52 percent who say they are “extremely important” and 17.41 percent who say they are “very important.” Those numbers are even higher among 18-24 year olds, 23 percent of whom rate student loan repayment programs “very important.”
In addition, the survey found that 54 percent of 18-24 year olds would rather their employers offer a student loan assistance program than a 401(k) match. This makes sense, considering the fact that Nexters are often in so much debt that they can’t afford to contribute to their retirement savings accounts.
The bottom line? An overwhelming number of talented young employees are crying out for student loan help. Despite this fact, very few employers offer this hot new perk. According to the Society for Human Resource Management, only 4 percent of employers offered student loan assistance programs in 2017. This is unfortunate for workers who want this perk. But it also means that employers have the opportunity to design cutting edge employee perk packages. If you own a business or run an organization, you should jump on this chance now. You could be one of the first employers in your industry to offer desirable student loan assistance programs and attract hundreds of talented Gen Z employees.
But how do these programs work, and how can your organization set one up? Let’s take a look.
How Do Student Loan Assistance Programs Work?
Many employers assume that because student loans themselves are so complicated and expensive, a repayment benefit will be complicated and expensive as well. But there are many options employers can choose from to design a benefit that works for their organization.
Any good student loan assistance program should include financial counseling and loan consolidation services. In fact, many HR experts say that this should be the backbone of the program.
A large majority of student debt holders say that they wish they’d understood more about the responsibility they were taking on when they took out student loans. Many high school students and young adults just don’t understand how those monthly payments will affect their lives in the future.
Financial counseling and loan consolidation, even if done after the fact, can be a great help to these borrowers. They may be able to lower their interest rates and monthly payments. They can also learn about saving for their own children’s college education so they are better prepared when it comes time for their kids to pursue degrees.
Third party vendors
Often, the student loan assistance program is administered by a third party vendor. You can talk to your insurance broker to see if they offer this benefit. This arrangement allows employers to make payments directly to the employee’s loan servicer. Employees can continue to make payments as well.
Designated monthly payment or employer match?
Will your company offer a set monthly payment on your employees’ student loans? Or will you match the employees’ contributions? Will you require your employees to continue to make their minimum monthly payments, or allow them to use your benefit to reduce their monthly payments? Either option will save money for the borrower.
According to the Student Loan Hero survey cited above, of the employees who want a student loan assistance program, 35.66 percent would prefer to use it to make part of their current monthly payment. 64.34 percent would use the money to make extra payments and take years off the end of their loan repayment period.
As we mentioned above, only 4 percent of employers currently offer student loan assistance programs. But those who do have a variety of approaches to degree requirements for participants.
For example, Aetna offers student loan repayment for employees who earn undergraduate or graduate degrees within 3 years of applying. Staples gives the benefit to all sales associates and high performers, regardless of their degrees. And Peloton, a high-tech fitness company, offers the benefit to all employees with undergraduate or graduate loans with no other requirements.
As an employer offering this benefit, it is up to you to decide the requirements for participation in your program. We recommend looking at the makeup of your workforce and their needs to determine what would benefit you and your employees the most.
Offering a student loan repayment benefit could be an excellent way to maximize diversity among your staff. Women and racial minorities are much more likely to carry student loan debt than white males, so this benefit alone could attract more diverse applicants.
In fact, a report by the American Association of University Women found that women hold 65 percent of the country’s student loan debt. That’s $833 billion out of a total of $1.3 trillion in student debt. Compare that to the $477 billion that men hold.
And according to the Urban Institute, 42 percent of African American families have student debt, compared to 28 percent of white families.
At this time, any money you pay out to an employee’s student loan servicer as an employment benefit would be treated as taxable income by the IRS. That means that the benefit might not be as lucrative to employees as a 401(k) match. Still, many young employees say they would prefer the student loan assistance program over retirement matching.
There is an initiative underway to pass legislation that would make this benefit tax free. Legislation has been proposed in Congress, though it’s unclear when or if it will pass. If it does, there is a good chance that many more employers will begin to offer this popular benefit.
If you are interested in exploring your options for offering a student loan assistance program to your employees, consider calling your insurance broker. He or she can answer more questions and help you design a program that will work for your organization.