http://www.hreonline.com/HRE/images/CarolHarnett106x106.jpgRelieving the Student-Loan Burden

College students entering the workplace are saddled with between $28,000 and $37,000 of student-loan debt. But as more employers are beginning to realize, the scope of the problem extends well beyond that group.

By Carol Harnett

When I began this series of columns last month on viewing employee benefits through an empathetic lens, I never anticipated the response from both employers and their workers on the topic of loans.

HR executives expressed angst over their employees' debt levels and the fact that companies weren't doing enough to provide practical assistance beyond the debt-counseling services found through employee-assistance programs.

Employee reactions, meanwhile, ran the gamut from expressing strong interest in a benefit that met their needs to asking for alternative ways to provide financial assistance: ". . . [L]oyal employees make a lot of sacrifices to their company, in many cases because they love the company, the people they work with, the good they can do in society, etc. What would it be like if, after all that time, some percentage of long-term employees needed some help with issues such as [debt] and companies just helped out -- without asking for anything in return?

"At first you'd say, 'Well, if [the company is] publicly traded, its investors would hate the "waste," ' but what if that approach locked up the best talent on the planet and drove engagement and productivity even higher? Would investors hate it then?"

So, I want to further contemplate the issue of helping employees with debt and begin by addressing the topic of student-loan repayment. But, rather than take a broad approach, I'd like to look at this problem through a single-employer perspective.

To ground us, let's first review some highlights on student-loan debt.

College tuition has more than doubled over the last 30 years and outpaced inflation by 2 percent to 4 percent, though we need to keep in mind that this statistic may not be quite as large as it first appears. Data from The College Board suggest that increases in the net prices students actually pay -- after taking grant aid and tax benefits into consideration -- have been smaller over the long term than the increases in published prices.

While May 2016 graduates are leaving their senior year with an estimated average debt ranging from $28,950 to more than $37,000, they are also more likely to find jobs and have better starting salaries than their predecessors.

Approximately 17 percent of graduates have parents who took out loans to pay for their sons' and daughters' education. Average debt for these parents is more than $30,000.

College dropouts who borrowed money to attend school were roughly four times more likely to default on their loans than students with degrees.

Given these statistics, HR leaders entertaining the idea of a student-loan-assistance program need to contemplate why they want to put such a benefit in place. Is it the sheer size of this debt that's driving this benefit, or is it the growing need to attract and retain younger employees?

Employers may also need to look beyond how to help employees with college degrees. What should be done -- if anything -- to assist employees who are also parents saddled with student-loan-related debt, and employees struggling with debt without the benefit of a terminal (i.e., a PhD) degree?

Take the following example. Arlington, Va.-based Consumer Technology Association is a 92-year-old company that started as a radio and electronics business and is now best known for being the producer of the Consumer Electronics Show. This employer provides robust benefits to its 155 employees, including a mortgage-assistance program with up to a $25,000 forgivable loan for the purchase of a primary residence in the county of Arlington, Va., or within a five-mile commute of CTA's office.

According to Bronwyn Flores, CTA's senior coordinator of policy communications, about a year ago, Gary Shapiro, the company's president and CEO, wanted to understand the hows and whys behind student loans. Shapiro values employees who worked their way through college and the enormity of this debt caught his attention. He also realized that younger employees were not taking advantage of programs such as the mortgage-assistance benefit. The reason? They couldn't get beyond their monthly student-loan payments.

So, on March 1, 2016, CTA kicked off its student-loan-assistance program through Tuition.io. The program is open to all employees with personal student debt, and CTA contributes $100 each month toward a loan payment for every worker signed up for the benefit.

CTA was somewhat surprised by the demographics of its early adopters. The company's assumption was that hourly employees in their early to mid-20s would make up the majority of the participants. But while 41 percent were in the 23- to 29-year-old-age bracket, an additional 41 percent were in their 30s, and 19 percent were over 40 years old.

It also turned out that it wasn't just new employees who were tapping into the student-loan program. Forty-one percent of program participants were with CTA for less than two years, but 31 percent were employed by the company for two to five years, 22 percent for five to 10 years, and 6 percent for more than 10 years.

Tuition.io recently released a product that allows employer contributions to also be applied to Federal Parent PLUS Loans. This option was not available to CTA at the start of its program, but the company may consider the benefit as it evaluates the program. CTA did not have to consider the topic of student loan assistance for non-college graduates since all employees possess at least a bachelor's degree.

CTA's early experience gives some indication of how broad a benefit a student-loan-assistance program can be throughout an employee population.

Carol Harnett is a widely respected consultant, speaker, writer and trendspotter in the fields of employee benefits, health and productivity management, health and performance innovation, and value-based health. Follow her on Twitter via @carolharnett and on her video blog, The Work.Love.Play.Daily.

 

Jun 1, 2016
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