With student loan assistance being the most sought-after benefit by employees, employers have an opportunity to help them boost their financial wellbeing and improve employee retention.
As employees seek new voluntary benefits to fit their ever-changing needs, student loan assistance has come to the forefront. In the United States more than 44 million people collectively owe $1.5 trillion in student loans, and help paying off student debt is the top employee request. The financial stress of paying off student loans can have negative implications on employee wellbeing in both the short and long term. One study, for instance, found that among college graduates with student loans, 29% had delayed their funding of retirement savings and 34% had delayed their funding of emergency savings.
For years, the public sector has provided some approaches to paying off student loans. In 2007, the federal government introduced the Public Service Loan Forgiveness (PSLF) program, in which public sector employees would have their debts forgiven after making 120 monthly payments. In practice, the guidelines were complicated, and the annual recertification process was arduous, leading many employees to drop out. In 2017, when the first group of public sector employees became eligible, less than 1% of people who applied, or 96 out of 28,000, had their loans forgiven.
Employers are recognizing the effects that student loans have not only on employee wellbeing but also on the company’s bottom line. One study found that 70% of employees spend at least one hour each week thinking about their stressors, including jobs and finances, which costs companies billions of dollars in lost productivity. That’s one reason companies are trying to help their employees navigate student loan assistance programs — from the federally sponsored program to loan refinancing and loan consolidation solutions for the private sector. And new legislation such as the CARES Act, which provides up to $5,250 in tax-free student loan assistance to employees, adds another dimension to consider.
Fortunately, HR teams now have a new option to aid them with student loan assistance. Aon offers a centralized solution that provides a voluntary student loan assistance benefit in its Everyday Benefit Solutions suite.
Here are three reasons HR executives should consider an external student loan assistance platform.
1. It’s Easier to Navigate the Complicated Loan Landscape
Centralized solutions can help break down the intricacies of both public and private loans. On the public-loan front, solutions such as Everyday Benefit Solutions can help employers take over the responsibility of recertification for the PSLF program and tell employees what they have to do to remain compliant so they can get their loan forgiven after making 120 payments. For private loans, centralized solutions can support employers in determining whether consolidating or refinancing a loan, which decreases monthly payments and boosts discretionary income, is the best solution for employees.
Aon, for example, segments its offerings based on what a given company needs, and it provides customized solutions for both the public and private sectors. For one employer, that might mean managing its contribution to employees’ student loan debt, in which case they might send wire transfers to different loan holders.
2. It Can Help Your Employees Save More Money
Early results of third-party programs for student debt assistance are encouraging. Aon, for instance, recently worked with a hospital to help employees implement the PSLF program. Aon was able to help employees reduce their monthly loan payments by 74% each month and therefore significantly boost employees’ monthly discretionary income and overall financial wellbeing. One of the unique benefits of these platforms is they can go beyond student loan assistance; they can help set up employees for financial success by offering broader financial wellness tools, including credit counseling and financial coaching.
3. It Can Boost Employee Retention and Recruit Top Talent
A student loan debt plan can connect employees to their organization in a positive way: It can create loyalty by reinforcing the message that company leaders want to help their employees achieve financial wellbeing. For example, one health company that used a third party to manage its student loan assistance program and provide employees with additional financial wellness tools, found that employees stayed 2.5 times longer than before the program was adopted.
With the median job tenure now shorter than five years, employers across the board are looking for incentives to extend employee tenure. Student loan assistance programs, as well as recruiting top talent in the first place, are key tools for this task.
 Household Debt and Credit, Federal Reserve Bank of New York; Everyday Solutions, Aon
 “Should You Save for Retirement or Pay Off Student Loans?,” Charles Schwab
 “28,000 Public Servants Sought Loan Forgiveness. 96 Got It.,” New York Times
 “Colonial Life study: Stressed workers costing employers billions – weekly,” Businesswire
 “Trilogy Health Services expands education-assistance benefits,” Human Resource Executive
 Economic News Release, September 22, 2020, U.S. Bureau of Labor Statistics