Student loan debt is a huge financial burden for many millennials entering the workforce. Because of it, young professionals are jumping from one job to another searching for bigger and better pay to help drive down their monthly bill.
In an effort to retain young talent, employers such as PricewaterhouseCoopers are offering to assist with paying down their employees’ student loan debts, provided they remain with the company for a set period of time.
PwC and other employers could see a tax benefit to offering these types of benefits if the Employer Participation in Repayment Act makes it through Congress. This bipartisan bill — introduced by Senators John Thune (R-SD) and Mark Warner (D-Va.) — would give companies a tax break for providing employees up to $5,250 a year to repay education debt, while saving employees from being taxed on the contribution.
Employers who currently offer debt assistance benefits to their employees typically start their assistance program at a lower amount, but Jeff Oldham, senior vice president of employer sales and the Benefitstore at Benefitfocus, says $5,250 is an excellent starting point to initiate staff with student debt into the company and retain them for longer periods of time.
“If I know I can pay off my loan in six years or know in three years that my debt will be cut in half, I can apply that money that would have gone toward my loans and put it toward my 401(k) or my HSA,” Oldham says. “I really think that is going to be an enormous recruiting and retention tool for many Americans.”
Right now, few employee benefit brokers are hands-on with loan repayment benefits. However, Monica Digon, chief client officer for brokerage Selden Beattie, says if this bill should become law, more progressive consultants would be encouraged to inform clients about the potential investments from these offerings.
“Those brokers who are ‘first movers’ are definitely going to move quickly, particularly those who serve the market of healthcare and professional services where your biggest cost is associated with your intellectual capital,” Digon says.
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Digon adds that these types of benefits would assist employers in the healthcare and legal industries due to many employees requiring higher forms of education such as masters or doctorates in their professions. “From a recruitment standpoint, particularly with the millennial generation, two years is a solid amount of time to have someone within your organization and having this benefit is a great way to retain that talent for even longer,” Digon says.
Oldham, on the other hand, says brokers who are only looking at the industries requiring PhD or MD-levels of education are not seeing the larger picture of how widespread the education debt issue spans, and how every industry could benefit from a student loan repayment benefit.
“You don’t have to have a PhD behind your name to have student loan debt,” Oldham says. “There are tons of data that show that this is not just a millennial benefit because you have Gen Xers and baby boomers taking out loans on behalf of their children.”
Oldham ads that the amount of crippling debt recent college graduates face is holding many employees back from remaining in a steady job and beginning a family or even buying a home.
Scott Thompson, CEO of Tuition.io, agrees with Oldham, saying this new piece of legislation could be the key to encouraging employers to offer debt assistance benefits and allowing millennials to break through the debt barrier that is holding them back from starting their lives.
“This bill is not only a clear win for employers and employees, but will also help stimulate the growth of the entire economy,” Thompson says. “Economically speaking, the tax subsidy this bill provides has a very high multiplier effect because it most directly benefits people who have the highest propensity to consume.”
Thompson adds because this cohort is 90 million strong — almost half of the entire workforce — their increased consumption will grow the larger economy. “This bill is the rare piece of legislation that provides social as well as economic benefits to society as a whole,” he says.
The Employer Participation in Repayment Act, or bill S796, has been read twice by the Senate Finance Committee and is currently awaiting deliberation for the next step in the legislative process.
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