The Advantages of Student Loan Repayment Assistance Over a Higher Salary
I’m the worst with money. Give me a dollar and I’ll spend it. Feeling me, all you impulsive spenders out there? Saving money is difficult! Maybe I’d do well to get professional help – a personal spending police at my side at all times to slap my hand if I so much as reach for that unnecessary item at the store! What can I say? I have a problem. Then, I got to thinking: that must be part of the benefit of the employer student loan repayment assistance program. It’s purposeful money.
One of the main questions that comes up when employers consider implementing the benefit is whether that money would be better off in the pocket of the employee in the form of a salary raise or bonus (or, for that matter, any other taxable benefit). Employers could easily allocate the money that they would spend on the employer student loan repayment assistance program to some other program. Of course, then they wouldn’t get the recruitment, retention, and engagement benefits of this particular program. Still, it’s a legitimate question.
The primary aim of the benefit is to help people get out of student loan debt faster. The key word is help. There has to be some real-world value to the program for it to be worth it to the employer. If it doesn’t help, then it doesn’t work. That begs the question: does the employer student loan repayment assistance program actually help those who receive it in some unique way?
To be convincing as a worthwhile investment, employers would have to know that if the program is, in fact, effective in helping debtors get out of debt faster, then, could that same effect be achieved by some other less expensive means. Wouldn’t a salary boost help just as much? Theoretically, the employee could take that money from their bank account and use it to pay off their student loans themselves if they wanted. They could also do a lot of other things with the money, and that’s kind of my point.
It might not seem like a major point but consider the fact that millennials spend more money on comforts and conveniences than any other generation. No judgment here; I’m just as guilty of such indulgences. It’s not my fault that Starbucks lattes taste so good. Sixty percent of millennials admit to shelling out more than $4 for coffee. Combine that with the fact that 9 out of 10 millennials confess to being impulsive spenders, coughing up an average of $5,400 annually, and you start to realize that maybe a lot of people just aren’t so good with money. Maybe – just, maybe – people need a little guidance with their finances.
Therein lies part of the helpfulness – and consequently, the effectiveness – of the employer student loan repayment assistance program. It’s difficult to misspend money that has a purpose. Think of a 401(k) or a savings account. We designate our money into categories in order to prevent mismanagement of our finances. You have your savings fund, grocery money, gas money, spending money, etc. It’s the responsible thing to do (so I hear). For an employee in debt, the employer student loan repayment assistance program is exactly that – a responsible designation of income.
I was struck by a recent article in The Atlantic where Steve Connelly, president of Connelly Partners in Boston, talks about his experience in offering an employer student loan repayment assistance program to his workforce of over 150 people. “When you’re an old man, your job is to get as many young people into a 401(k) as possible,” Connelly is quoted in the article. “The kids that work for me today, they’re saddled with so much debt that, one, I feel some obligation to figure out how to help them, and, two, they can’t take advantage of our traditional 401(k) match.”
Did you catch that? He feels an obligation to help them. His paternal attitude towards his employees aligns perfectly with the type of guiding power that rests at the heart of the employer student loan repayment assistance program.
This brings me back to my original question: can the program actually help people in a way that simply giving them a higher salary or a bonus can’t? I think the answer is clear. It depends on the person. Certainly, it can’t help everyone. Not everyone will be the right fit. Some won’t need the help. However, for some people, the employer student loan repayment assistance program will be instrumental to their financial future. It will help them.
I’m a 32-year-old writer based out of San Antonio, Texas, with my own mountain of student loan debt to conquer. When I’m not working, I’m either out for a run on the trails or chilling at home with my rescue dog, Vincent (for Van Gogh, my favorite painter). I like to eat (a lot), read (I’m a real horror junkie, with Stephen King topping my list of favorite writers), watch movies (Titanic – yes, Titanic – is the be-all and end-all for me), drink wine (red only, please), travel (Italy has my heart and always will), collect crystals, meditate, and read tarot cards. Perpetually single, but a softie deep down, I try to stay true to my hippie heart and find the good in every person and situation. I remain curious and open to learning new things (except for math which, I am convinced, will always be my downfall). If I can answer any questions about my work here on student loan debt and repayment assistance programs, feel free to shoot me an email. I don’t bite (usually). [email protected]
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