It’s often said that if you can’t find the answer, you might be asking the wrong question.
That philosophy might well describe the metamorphosis of thinking around approaches to student debt.
Until recently, most of the hand-wringing on the subject has focused on how to help people avoid amassing so much debt in the first place. But more and more companies have started asking the question from the other side of the equation: “How can we help people with the student debt they already have?” That’s led to a growing number of companies offering student loan assistance as a way to attract valuable college grads.
Student Loan Assistance: More Than Just Extra Cash
The smart programs do more than just dangle the carrot of extra cash; they pay a portion of the loans directly to the servicer. Why? The answer is what might be called the 401k-effect — the money does its job because it’s committed before it can be used for something else. But there’s an even more tangible benefit.
Matching payments on an employee’s ten-year loan can potentially cut that commitment in half. And five years versus 10? That’s huge. Even better, it leaves people with the confidence they’ll actually get the loan paid off. Given the exasperatingly confusing nature of most college loans, not to mention the astounding rate of default and delinquency, a picture of a future with a clean slate and an intact credit rating is worth more than a thousand words.
While there’s been a lot of interest in the idea, some employers are still on the sidelines waiting to see how loan repayment pans out for the early adopters. But there are really good reasons you don’t want to wait too long.
A Hiring Crunch is Here (and poised to get worse)
You’ve probably heard about the retiring boomers, not to mention the slowest growth in the working-age population since World War II. The combination has all the makings of a talent shortage that expects to reach critical mass in the next few years. The increased competition for talent means that starting now, employers will need every tool in their possession to stand out to those top hires.
Millennials Want it Most
Many of the most heavily indebted are in the pivotal Millennial demographic. Their thousand-a-month-plus payments on loans are putting big dents in early-career paychecks. Many told our Millennial study that, given the cost of tuition and the fact that their degrees were required for hire, they’re going to be looking for companies willing to help pay off some of the debt. So the words “debt repayment” on the employee benefits roster is like a giant neon sign saying, “We’re Millennial friendly!”
You Don’t Want to Give Competitors an Edge
Remember 2006 when the smart phone was that fun fad that nobody would ever really need? How’d that turn out? Not only did phones become essential, those who waited ended up playing catch-up while their early-adapter friend looked like the ultra-shrewd smart kids on the block. The cool things that a few people covet have a way of turning out to be the things that everybody demands. And you always want to be the folks on the front end of the revolution.
Finally, there’s perhaps the best reason for student loan assistance: it’s a really attractive part of a recruitment pitch. Imagine yourself fresh out of college and being courted by two companies, one offering to reduce the 120 payments you see in your future down to about 60.
Which one would you take?
That’s a question most employees could answer easily.