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LeeMarie
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December 20, 2018

Paying Off Student Loan Debt: How the New IRS Ruling Helps You and Your Employees

The prospect of increasing your company’s retention rates may seem daunting or complicated, but recent findings show that competitive companies are expanding their employee benefit programs to help reduce student loan debt for their employees. Why?

 

The Work Institute reports that the cost of turnover is expected to increase to $680 billion by 2020, and smart companies are doing everything they can to get ahead of the curve and keep their top employees. Use our ROI calculator to see how much money you could save in retention.

 

According to a survey conducted by Common Bond in 2018, 86% employees facing student loan debt say they'd stay with a company if it offered a loan repayment benefit. This presents your business with a major opportunity.

 

Couple that with a recent IRS Private Letter Ruling that allows employees to repay their student loans and share in your company’s 401(k) plan, and it’s clear to see why helping them pay off student loan debt helps your company’s bottom line. Increase retention, while helping them pay off debt and secure funds for the future. It's a win-win that will keep your best employees around longer.

 

Here’s how it works: Employees make a student loan payment of at least 2% of their pay and the employer makes a matching contribution equal to 5% of employee pay into their 401(k) plan. This IRS ruling only applies to the Illinois-based health company, but it opens the door for companies like yours to make the same request.

Want to know what else innovative employers are doing to benefit from this new ruling? Here are 3 ways they’re taking advantage of an opportunity to increase employee retention and help conquer student loan debt:

  1. Offer to make a monthly student loan payment. Many employers pay a specified monthly amount – usually $50-$100 a month (with a cap of roughly $10,000) – to help pay employees pay down their loans. LEAF specializes in seamlessly setting up this system for your company. Sign up to simplify the process.
  2. Provide financial wellness assistance. Many employers offer financial wellness advisement and assistance in a one-on-one capacity, helping employees navigate an array of debt repayment scenarios. Oftentimes, financial hardships place extra stress on employees, which can affect their productivity and tarnish time spent in the workplace. Financial wellness programs help alleviate some of that tension and set them on a course for future success and soundness of mind.
  3. Use the benefit to attract the best talent. Today’s top graduates are stepping out of college with an average of $39,400 in student loan debt. They’re bright, they’re hungry, and they make for major assets to your workforce. But most of them expect (and often need) more that your typical benefits package in order to sign their first job offer. A student loan repayment option just might be the extra offering that makes your company stand out above all the rest.

 

 

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