For the typical college graduate, student loan payments are a demanding monthly obligation. Oftentimes, this is the first time they are required to pay down any sort of debt and their first real challenge in dealing with money.
Student loans also happen to be the second leading form of debt in the United States.
Large amounts of debt are bound to cause problems for young workers as they move forward in life, which it largely has. It’s not a secret that recent college graduates are purchasing houses at lower rates today, are not starting families as early, and are even starting to prepare for retirement later.
With that in mind, student loans present an interesting opportunity for companies looking to recruit the best young talent. Specifically, many companies are starting to offer student loan repayment assistance as a benefit to attract and retain young workers.
As mentioned earlier, young college graduates are sidelining important considerations such as retirement and home buying, while prioritizing their student loan debt. It isn’t crazy to infer that a new employee with student debt would value a student loan repayment benefit over a retirement benefit or maybe even paid time off (if you’re wondering whether they would, you’re in luck. We found that out).
We decided to ask recent college graduates from the Classes of 2013 through 2017 a few questions about student loan repayment benefits. We wanted to gauge their overall feelings about student loan repayment benefits and their impact on student loan repayment. We also found out what some people would be willing to give up in order to have a student loan repayment benefit. The results are rather surprising.
Q1. Do you currently receive a student loan repayment benefit from your employer?
-19 percent said “Yes”
-81 percent said “No”
The following questions were only asked of respondents who replied “Yes” to Q1.
Q2. How much per month do you receive via your employer’s student loan benefit?
Q3. Are you making payments on top of your employer's contribution?
-93 percent said “Yes”
-7 percent said “No”
Q4. Does your employer offer matching contributions each month?
-65 percent said “Yes”
-35 percent said “No”
The following questions were asked of all respondents.
Q5. Does stress from the prospect of repaying your student loan debt hurt your daily productivity at work?
-57 percent said “Yes”
-43 percent said “No”
Q6. If a potential employer offered a student loan benefit, would you strongly consider that job offer over others without the benefit?
-84 percent said “Yes”
-16 percent said “No”
Q7. Would you consider a salary cut if you received a student loan repayment benefit?
-53 percent said “Yes”
-47 percent said “No”
Q8. At this time, would you give up retirement benefits for a student loan repayment benefit?
-33 percent said “Yes”
-67 percent said “No”
Q9. At this time, would you give up basic healthcare benefits for a student loan repayment benefit?
-23 percent said ”Yes”
-77 percent said “No”
Q10. At this time, would you give up dental care benefits for a student loan repayment benefit?
-38 percent said ”Yes”
-62 percent said ”No”
Q11. At this time, would you give up life insurance benefits for a student loan repayment benefit?
-43 percent said “Yes”
-57 percent said “No”
Q12. At this time, would you give up paid time off (PTO) if it meant receiving a student loan repayment benefit?
-46 percent said “Yes”
-54 percent said “No”
Q13. Have you heard about the new student loan benefit legislation, HR 795 - Employer Participation in Student Loan Assistance Act?
-16 percent said “Yes”
-84 percent said “No”
Q14. How do you want congressmen to vote on the Employer Participation in Student Loan Assistance Act?
-62 percent said “I want him or her to vote yes”
-3 percent said “I want him or her to vote no”
-35 percent said “I’m not sure”
Q15. What do you think would be most helpful while repaying student debt?
For starters, in regards to Q1, we thought 19 percent was a little high given the fact that only 4 percent of companies offer the benefit, according to the Society for Human Resource Management.
However, this can be explained easily. Since the poll covers 500 respondents and is targeted at young workers with student debt, the portion of people with a student loan repayment benefit should be higher than usual.
Most workers with a student loan repayment benefit are taking full advantage of it.
Of those who received a student loan benefit, a stark majority (93 percent) make additional payments on their student loans. This is an excellent sign. Making extra payments on a student loan is a surefire way to reduce the cost of interest and finish repayment early. Young workers can accomplish this without the extra financial strain by making otherwise typical monthly payments on top of their employers' contributions.
Many people would forgo basic employer benefits for a student loan repayment benefit.
We asked four questions about what people were willing to give up in order to receive a repayment benefit. Here are some of our favorites:
23 percent said they would give up basic healthcare benefits for a student loan repayment benefit.
Paying for healthcare can get pretty expensive depending on your situation, and many companies offer well-established healthcare benefit packages. However, there is some merit in this decision. At face value, it makes sense. The average healthcare premium is $321 a month, while the average student loan payment is $426 a month (assuming $37k owed, 6.8% interest, 10-year repayment). However, most student loan benefits wouldn't cover over $400 a month, and healthcare benefits are typically more robust, useful, and offer more than just covering the cost of an individual average premium.
33 percent said they would give up access to retirement benefits now if it meant receiving a student loan repayment benefit.
This isn’t really surprising considering that more and more young graduates are putting off retirement in favor of focusing on their student loan obligations. In theory, this is bad news because starting to save early for retirement can exponentially increase your net worth down the road. However, there is some logic to it. Many young workers are not ready to be bothered with planning for retirement despite its merits, and they may want to first tackle the problem at hand, student loan debt.
A similar point can be made of the 43 percent who would give up life insurance – many of them do not have families or any beneficiaries for such a benefit, justifying the decision to prefer a student loan benefit over life insurance.
38 percent would give up dental care benefits.
The cost of dental care is high with the average check up costing $290. If you have unhealthy teeth, it only gets worse. With that in mind, a dental care benefit would be extremely beneficial. Why would young workers forgo this benefit? Perhaps many of them could already be covered by family plans through their parents.
Surprisingly, a large group (46 percent) would give up paid time off.
This is interesting, and it’s also an encouraging sign. Many young workers are willing to give up their paid vacation for help with their student debt payments, showing they take their student loans seriously and are willing to sacrifice popular perks.
When asked about recent student loan benefit legislation...
While a large group of respondents would give up basic benefits, take a lower salary, would strongly prefer a job offer with a student loan benefit, and would give up paid vacation days, the majority (84 percent) haven’t heard about the latest legislation involving student loan repayment benefits. H.R. 795, the Employer Participation in Student Loan Assistance Act, would incentivize companies to offer the benefit.
Despite the lack of knowledge, a majority of respondents (62 percent) still think their congressman or congresswoman should support the bill. The bill would definitely help student borrowers out. It expands a tax exclusion that incentivizes employers to offer a student loan repayment benefit. If it went through, employers could offer more each year, and more employers would be encouraged to include it in their benefits package.
Some respondents don't quite understand the usefulness of a student loan benefit when compared to other ways to pay down student loans.
In reference to Q15, most of our respondents (34 percent) think that an income-driven repayment plan would be more helpful than a student loan repayment benefit when repaying student loan debt.
This was somewhat startling. While an IDR plan can provide a bit of reprieve from costly monthly payments, it is not the most effective way to eliminate debt. In many cases, the capped monthly payments are too small to effectively reduce the principal balance when factoring in interest capitalization.
To be fair, an equally large number of respondents (33 percent) thought a student loan repayment benefit would be the most helpful, while 30 percent thought student loan refinancing at a lower interest rate, another useful option, would be more helpful (we’re going to ignore the 4 percent who would prefer to start their own GoFundMe projects - potentially helpful, but implausible).
The survey was conducted using Pollfish and was targeted at 500 people who were working full-time and had student loan debt. We surveyed recent graduates from the Classes of 2013, 2014, 2015, 2016, and 2017. The survey was conducted on October 19th, 2017.