Could Student loan assistance be the new employee benefit offering?
A new employee benefit is being looked at in the US – student loan assistance. Whereby your employer helps you to repay your student loan by matching the repayments you make to your loan provider. While this seems like a promising idea, could it really work in the UK and what would be the benefits?
The impact of student loan debt
A briefing paper issued by the House of Commons estimated that the average debt for new graduates a decade ago was just £15,000. It currently stands today at more than £40,000 for new students and more than £50,000 for those from the poorest backgrounds.
Also, from September 2018 students in England, Wales and Northern Ireland will face interest rates on their loans of up to 6.3% until the April after they graduate. So, it’s not surprising that research carried out by financial technology company Intelligent Environments found three-quarters of university students polled felt stressed about the amount of debt they were accumulating while studying. With 39% claiming that their debt has prevented them from being able to afford their weekly food shop.
Repaying a student loan
Unlike in the US, you don’t have to start repaying your student loan in the UK until you earn above a specific threshold. This is currently £25,000 a year. You also have 30 years to repay the loan. If you do not pay it back within this time, the loan is written off, and you will no longer have to repay the debt.
For those earning below £25,00 a year, a student loan assistance benefit being offered by an employer would not necessarily be of any help, as they wouldn’t be making payments anyway. However, for those who do climb the corporate ladder and earn good yearly salaries above the earnings threshold, this potential employee benefit could be very enticing.
Benefits of student loan assistance from employers
One of the major upsides for a company offering such an employee benefit would be the potential for better retention of current valued employees and the attraction of new talent to the business. When skilled professionals have their pick of employers, this type of benefit could prove to be a differentiating factor when deciding who to work for. Contact us to find out how we can help you to create an attractive employee benefits offering.
Other benefits are primarily for the employee themselves. The amount of relief felt by an individual who feels that their debt is under control and will be repaid without an extra burden on them can’t be underestimated. With the debt likely to be repaid sooner under such a scheme, it will mean that the monetary impact on the employee would be over a shorter period. Potentially giving that member of staff more financial opportunity in the future when they will be free from the debt.
The benefit of having a happier workforce should not be discounted. The 2018 Happiness Survey found that 43% of workers in the education sector would work harder if they are happy in their current role or place of work. Offering corporate benefits like student loan assistance could go some way to increasing your staff’s morale and increasing productivity.
Could it benefit the economy?
This sort of corporate scheme could possibly increase the amount of student loans that are repaid each year. Meaning less burden on the tax payer and the Government when it comes to the number of student loans that need to be written off after 30 years.
Would it work in the UK?
Whether such an employee benefit could work in the UK remains to be seen. There are many factors to consider, including tax implications. However, with student loans playing on the minds of any young person considering higher education, the indications are that there could be an appetite for employee benefits of this nature going forward. Find out more about planning for the cost of higher education from Mike Robertson Associates Ltd here.
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