August 01, 2018Participant Financial Wellness Services

This article is the second installment in a series on Student Loan Repayment Benefits. The first installment discussed why the benefit is gaining traction with employers and the variety of services that are available. We recommend you take a look at Part 1 if you haven’t seen it already.

Once an employer has learned the “Why” and “What” of student loan repayment benefits, it’s time to decide if you’re going to add this feature to your benefits package, and if so, who will be your administrative partner and which employees will be eligible.

Key Program Elements to Consider

None of us wants to blindly implement a new benefit and cross our fingers that it makes a difference. Below are some key questions to consider when deciding if you’ll offer a student loan benefit, and what elements to include to ensure it’s as effective as possible. 

1.        What percentage of your employees are likely wrestling with student loan debt (for themselves or their children)?

2.       What types of communication and promotion are your employees most responsive to?

3.       Would you like to simply offer resources to employees facing significant student loans or would you consider making financial contribution to help them pay the loans down faster?

4.      What features are important to you?

5.       If you partner with a benefit administrator that is a lender (or tied to one), could you as the employer be viewed as endorsing that institution? Does that matter to you?

6.      How will you measure the success of a program? Does the administrative partner you’re considering offer an ROI analysis?

Other Considerations:

Taxes – Employer contributions are considered taxable income for the employee, but a bipartisan bill introduced February 1, 2017 would revise Section 127 of the Internal Revenue Code and make employer student loan contributions tax-free, similar to tuition reimbursement programs.

A Discriminatory Benefit – One of the most common questions I hear is, “what about all of the employees who don’t have student loans, is that considered discriminatory for them to miss out on this perk?” It’s a valid consideration. That concern can be addressed in a few ways. First, make the benefit (at least the tools and education if not the monetary contribution) available to employees’ entire family. Second, consider the other benefits that are not universally relevant to all employees: tuition reimbursement, dependent care expenses, onsite childcare, public transit or commuter benefits.

Payroll Deductions – Some employers have considered implementing payroll deductions to be directed towards employee student loans (facilitating the employee contribution). Set it and forget it solutions are nice, but keep in mind that many lenders offer a discount if borrowers setup an automatic deposit from their bank account – which your employees would miss out on if their payment goes through the payroll system instead.

Conclusion

Student loan repayment benefits are a niche financial wellness benefit to help employees with a specific financial challenge. While not holistically helping employees with financial wellbeing, the benefit can alter an individual’s financial trajectory and have ramifications on a myriad of other financial behaviors. There’s the potential to create great buzz and enthusiasm fostering loyalty and trust, and ultimately help the organization’s bottom line.

"There's the potential to create great buzz and enthusiasm fostering loyalty and trust, and ultimately help the organization's bottom line."

I’ve never heard of another employee benefit leading to high fives for the HR Manager in the hallway (well, except perhaps free donuts, and we all know how long the positive impact of that benefit lasts.)