Millennials account for the largest demographic in the workforce today (Berman), and by 2025 will make up 75% of our working population (Forbes). With new technologies, more people deciding to branch out and start their own businesses and telecommuting jobs becoming popular, it’s important for employers to understand how they need to adapt previous HR policies for recruitment and retention to fit today’s workforce.
A promising solution to this change in the playing field is to offer a student loan repayment program as part of an employee benefit package. In a study done by the American Payroll Association, it was found that two-thirds of Americans live paycheck to paycheck. As college tuition costs rise, millennials who graduate and enter the workforce are finding themselves with large amounts of debt while simultaneously facing job scarcity.
In fact, not only are millennials inhibited from saving due to student loans (Paylocity), they have the lowest retirement savings rate of any demographic at 7.5% (EBRI). Because there is evidence that millennials also are not as responsive to the traditional employee benefit package and instead seek jobs where they are more likely to have work/life balance as well as travel and vacation opportunities, offering a student loan benefit gives employers hope that innovations can be made to attract top young talent.
Prudential Retirement is partnering with Student Loan Genius to develop a creative solution to the one barrier to this otherwise highly inventive idea: the fact that no current tax breaks exist for loan repayment programs, thus employees could end up being heavily taxed if they receive a loan repayment benefit (Paylocity).
Prudential Retirement and Student Loan Genius are working to offer a pre-tax 401k contribution whenever an employee makes a payment on their loan (Society for Human Resource Management). This type of contribution would help an employee avoid heavy taxing and simultaneously save for retirement.
According to the Employee Benefit Research Institute, millennials have lower employee benefit participation rates than Gen Xers or Baby Boomers. Seventy-six percent of respondents to the American Student Assistance’s recent survey indicated that their choice to take a job would be positively impacted if a student loan repayment program was offered. As employers continue to search for new ways to engage their workforce in these programs and hire new talent, some form of loan repayment program may be the answer.