Student loan repayment assistance is becoming one of the most important higher education benefits. The pandemic has created a sense of urgency: tight economic conditions make it difficult for employees to repay student loans. Those close to completion worry that taking student loans to complete their education will create an insurmountable debt. However, higher education attainment is important – especially during the current labor market. During the pandemic individuals with higher education had the highest employment rates. Business with employees who had attained higher education benefited from employees that had knowledge and skills to adapt to change, solve problems and rapidly adopt new practices. Offering student loan repayment assistance helps businesses recruit and retain qualified employees at this crucial time.
Student loan repayment is more than a financial concern to individuals. It is so vital to economic recovery that it is included in current legislation. The Coronavirus Aid, Relief and Economic Security (CARES) Act, passed by Congress in March, allowed employers to make tax-free student loan payments for their employers until December of 2020. Before the CARES Act employers could only provide tuition assistance as a tax-free higher education benefit. With the CARES Act, employers can repay up to $5250 of an employee’s student loans without income or payroll tax.
Congress has acknowledged the economic advantages of tax-free student loan repayment assistance are important for both employees and employers, and has extended the loan repayment provision through December 2025. Recent graduates will be able to use this benefit to help relieve their loan burden; employers will have the ability to recruit and retain skilled, knowledgeable employees who have attained higher education. “This is a win for both graduates and employers,” Sen. Mark Warner (D-VA), who was the first to graduate from college in his family, said. “By extending this provision, employers will have the ability to continue to recruit and retain a talented workforce while also helping working Americans manage their financial future through and after COVID-19.”
Student loan repayment assistance can help employers find the most qualified employees. To recover from the pandemic-caused economic setbacks, businesses need to attract employees who have skills that can move their businesses forward. Recent graduates with technical expertise and problem-solving skills will be in high-demand. These graduates will be looking for benefits that give them economic advantages, such as student loan repayment assistance. This benefit is becoming more common and the employers that offer it are at an advantage to recruit talented workers. A 2019 SHRM benefits survey showed that 8 percent of employers offered benefit, compared to 4 percent in 2018. SHRM expects that by 2021, a third of employers will offer student loan repayment assistance.With the tax-free provision of the CARES Act, more employers will see the advantage of student loan repayment assistance as a tool to recruit talent. With the tax-free provision of the CARES Act, more employers will see the advantage of student loan repayment assistance as a tool to recruit talent.
By 2025, millennials will make up 75 percent of the workforce. This means that it is important for businesses to retain qualified workers. Competition for talent will be intense, and businesses who offer competitive benefits will have competitive advantages. Most millennials needed student loans to finance their educations and most need student loan repayment assistance to establish economic security.
Student debt isn’t solely a personal matter. It also impacts businesses. An American Student Assistance (ASA) survey shows that worries about student debt have a negative effect on workers age 22-33:
• More than half say they worry about student loan debt most or all of the time
• 65 percent say they may look for a second job to help pay off loans
A benefit that relieves this anxiety can help retain employees:
• 86 percent would commit to a company for five years if their employer helped pay their student loans
• 92 percent would take advantage of a match for student loan repayment, similar to a 401K match
“Employers should realize that in order to retain the brightest young talent and demonstrate their commitment to employee well-being, they need to provide concrete and straightforward solutions to help alleviate the burden of student loan debt,” says Kevin Fudge, director of consumer advocacy at American Student Assistance (ASA).
In extending the student loan repayment assistance in the CARES Act, Congress has provided businesses a tool to establish economic recovery. For several years, Edcor has assisted its client in making student loan repayments an integral part of their education benefits. These clients benefit from recruiting workers who learned skills that will move them into the future of work and from retaining workers that are productive and engaged. “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,” said Sangeeta Moorjani, head of workplace products for Fidelity Investments, a Boston-based financial services company. “In the war for talent, solutions to address student debt can give employers a competitive advantage.”
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