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Student Debt Relief: Innovation or Fad?
By Kyle Von Ruden, Benefits Consultant & Principal
 
Younger workers are challenging employers’ status quo and I like it!  In today’s tight labor market, employers are finding they need to “reinvent” themselves to be more attractive to job seekers. And once they land these new employees, the tight labor market is driving them to focus on efforts to retain these talented individuals. 

Benefit programs are evolving into much more than the historical designs we are used to: health, dental, vision and possibly life and disability plans.  Today’s employees want more. Frankly, they may need more. Fundamentally they want their employer to demonstrate they care about them and their personal needs through innovative benefit ideas and funding opportunities outside of the traditional paycheck.

You might be able to relate to this idea, because you at one point in your life may have been (or may still be) burdened with a big nugget of debt to pay off before even looking to finance a home, car, wedding ring, etc.  This nugget is the dreaded student loan that follows that hard earned degree you pursued to help you find that great career opportunity.  Wouldn’t it have been nice 5, 10, 15 years ago as you entered your young career to be offered student debt relief by an employer who said “we’ll help get rid of it while you are employed with us?!”  You would have been able to advance your standard of living much quicker.

We’re experiencing an evolution of the nature of the employment relationship and this article simply identifies one of the changes we are seeing in this evolution.  I’d like to take this opportunity to shed light on what an increasing number of employers are already doing in the area of student debt relief and discuss we expect to see grow in overwhelming popularity in the very near future.  Employers are creating various programs to help alleviate student debt to their incoming and existing pools of employees.

According to a 2018 Forbes article *, there are currently about 44 million borrowers of student loans with an average estimate of $37,000 owed individually and rising.  Student loans are outpacing income levels and inflation.  There are various compensation programs available for an employer to help reduce an employee’s loan balance.  These programs are not tied to ERISA and if desired can be written solely by the employer as long as they follow the administrator’s guidelines.  Many insurance carriers as well as third party administrators are offering programs that employers may enlist in for minimal monthly fees.  The employer contribution is a taxable benefit and often the employee’s portion is post tax.  You might see an insurance carrier build the cost into these programs as a part of paying a premium for their insurance lines of coverage.  The standard third party administrator whom you might use for FSAs, HSAs, HRAs, and COBRA administration are building these types of programs into their menu of services as well.  Think of what an employer contributing $100 or more per month could to do to help alleviate the stress of your employee facing these payments for years.  Or in a different fashion, you could provide a program to help employees refinance debt instead of providing them the monthly payments to reduce their debt as mentioned above. 

Compliance is obviously very important so you will want to do your homework when looking to design a program that addresses your needs and is also compliant with IRS and other rules and laws.  Lean on your trusted business consultants to help you navigate the various designs and vendors available to you. 

The bottom line is that, you, the employer, are continually challenged to deliver solutions that attract and retain employees along with helping your employees in their daily lives.  Employer sponsored programs that help reduce student debt are rising in demand and accompany other growing programs such as legal assistance, identity protection, employee assistance programs, wellness incentives, pet insurance , support for behavioral and mental health concerns and employers even contributing to 529 college savings plans.  Providing your employees with tools like these may make the difference between a potential candidate choosing your company over other offers. It also demonstrates to them the commitment you have toward improving their lives. That in turn may build their commitment to stay with your organization which is beneficial to both them and to you.

          *Student Loan Debt Statistics in 2018:  A $1.5 Trillion Crisis by Zack Friedman
 
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