January 28, 2020Uncategorized
“Student loans” was a major topic of discussion in 2019, and for good reason.
Evolving from a problem into a full-blown crisis, a study conducted on student loans deduced that in the U.S., the burden of student loans amounted to $1.6 trillion. And with a slower rate of repayments, this number is expected to rise in future.
A surmounting issue this may be for most future students, this problem is an even greater one for employers searching for the right talent!
The Problem with Student Loan Debt and Employment
As a business person or entrepreneur, your responsibility is to do what’s right for your company, a personal passion of yours. But, consider this situation from your employee’s perspective. Unlike you, they don’t have the opportunity or the means to invest their energy in their passion project, or to support yours.
Just paying off student loan debt takes 10 years. With the amount coming in at $37,172 on average (a hefty chunk of money), any potential employees won’t choose a job that matches their work style. They’ll choose one that offers the most money so they can stay afloat while paying off their debt. They’ll need that money to support their lifestyle, start a family, or contribute to their 401(K).
And as an employer, your business will suffer. And even if you manage to find good employees worth their salt, you’ll experience a lot more issues. Employee burnout, faster turnover, disruptive behavior—your employees will not be able to cope with the pressure of pursuing their dreams while paying for a college education that got them there.
They’ll regret it and your company will experience that loss.
Human Capital Management 101—Creating a Student Loan Repayment Program
Penguin Random House, Staples—there are plenty of companies that now offer a limited student loan repayment program for their employees.
If your company is new to the game, here’s what your program for student loan help requires:
A Set Monthly Payment
While most companies do start off at about $50 – $100, you can choose to increase this amount if your company can afford it. Though this amount may seem small in theory, contributing your help will save your employees from thousands of dollars in interest on loans.
A Cap on Maximum Amounts
Especially if you’re a new company that’s hiring plenty of new hires with student loans, you’ll want to set a limit on how much you will be willing to contribute. Otherwise, your employees will speak of unfairness and bias for one employee against dozens.
If someone has legitimate debt problems, they may be eligible to receive the repayment amount from their company. However, you’ll have to make it clear that the non-discrimination rules that apply on other company benefits like 401(K) and health insurance won’t apply for them, so their limit might be different than others.
Work for Repayment
You’ll want to be sure if you want to tie a specific work commitment in exchange for loan repayments from your employee. A sticky subject, since most people will feel as though you’re buying them out, it’s best to keep these work commitments connected to their actual work, and not added responsibilities. Your employee will not take it kindly if you stress your favor on them in exchange for extra work.
Keep in mind, the amount you put toward paying off your employee’s student loans will also be considered part of their wages. So, you’ll want to make it clear to your employees that this payment will still be subject to payroll tax withholding as well as federal income.
Effect of Student Loan Repayment Plans, According to Human Capital Management Rules
Think of it as an investment in your company’s success and future!
Potential candidates will approach your company if they know it offers student loans benefit. So, you’ll get the cream of the crop who will be more than willing to put in the hours and years to the success of your company in exchange for help with student loan repayment.
This will result in a slower turnover, and better attendance. After all, mental health and stress play a big role in our overall health. With the worry of paying their student loan off their shoulders, employees will not just feel healthier and happier, they’ll want to work more so they can reap the benefits of their hard work by decreasing their loan amount.
And despite the student loan repayment plans, you’ll save money for your company since paying student loans at a minimal capped cost is not that burdensome for the company to begin with. So, you’ll save up on your budget, improve your company’s retention rate, and you’ll help your employees stay happy too!
Conclusion: Human Capital Management is Necessary
Your employees are facing a lot more problems than you might think. Given the way our global economy is, unless they’re in the top 1%, your workforce won’t come across $1.7 trillion any time soon. So, offer your help by implementing a student loan repayment program. You’ll recruit better talent, you’ll lower expenses, and you’ll boost employee productivity, all with one powerful step. You can use this student loan consolidation calculator to know exactly where your employees stand with their student loans.