Health insurance. Vacation. A 401(k) program. Student loan debt repayment. Wait, what? Believe it or not, student debt repayment programs are increasingly a benefit offered by some larger companies.
When you consider that the class of 2015 graduated with an average of $35,000 in student debt, it’s clear that younger employees are increasingly bowing under the crushing weight of student loans. In fact, The Department of Education has reported that approximately $1 billion in loans has been collected in each of the past few years through wage garnishment, a 40 percent increase from 2006. Given that recent graduates often start their careers at smaller firms, the potential collection burden to small businesses is significant.
Here are some ways that small business owners can help them with their burden, while earning the continued loyalty of these valued younger employees.
Consider offering assistance as a benefit
Seem like something only a larger company can offer? Not if you swap it out for another benefit. Consider that a study from Student Loan Hero, a website that helps borrowers tackle their student loan debt, found that nearly half of the workers it surveyed would prefer student loan repayment assistance to a 401(k) retirement plan match. Student Loan Hero took the results to heart; it offers a three percent match of an employee’s salary and allows each to choose if they’d like it to go toward student loans or a retirement plan.
Another small business having success with a student loan repayment option is Little Newtons Early Childhood Education Centers in Minneapolis. Owner Alise McGregor finds it’s a way to build loyalty among her younger workers, which helps keep her clients happy, since these younger workers are caring for their children all day. “Children benefit from consistent caregivers, so it’s important to us to invest in our team," she says.
AJ Saleem, director of Houston-based Suprex Learning, a private tutoring and test prep company, employs this unusual tactic to help his employees minimize interest fees. As a recent graduate who was able to pay off his loan thanks to family assistance, he started the program to help those who lack similar support. About two-thirds of his workforce is comprised of college graduates with student loans to pay off. Loans for part-time workers average around $1,500 a year; full-time employee loans are around $3,500 per year. “I intend for this loan to be a long-term benefit, so I allow them to delay paying me back until either they resign or they finish paying off their loans,” he says. Of course, if they leave they have to pay him back immediately, a condition they agree to prior to taking the loan. “I find their hard work and subsequent loyalty more than make up for the interest-free loan I’ve provided,” he says.
Teach them money management skills
As the owner of boutique consulting firm CDJ & Associates in Southfield, Mich., and the mom of five millennials herself, Camille Jamerson understands the need to help this group with money skills. One of the programs she offers her employees is a series of workshops on personal finance to help them with basic money skills many have never learned. She also developed a “Biggest Loser” contest that had participants compete to see who could pay down the largest percentage of their debt, given specific parameters. “These programs have been cost effective and have helped tremendously in garnering millennial loyalty,” she says.
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