A Unique Benefit Millennials Will Thank You For

A Unique Benefit Millennials Will Thank You For

Many millennials entering the workforce are burdened with student loan debt. And according to some articles, the average student in the class of 2016 has $37,172 in debt. In the fight for talent, employers are getting as creative as they can to attract and retain talent to grow their businesses and some are turning to student loan repayment programs as a new, unique benefit to employees.

In this episode, Paige Tamlyn and Brandon Laws discuss student loan repayment programs, why it would or would not make sense for your organization, and how to implement such a program.

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Run Time: 18:39

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Brandon Laws: Hey, welcome back for another episode. I’ve got Paige Tamlyn here with me.

Paige Tamlyn: I’m back.

Brandon Laws: Yeah, you’re back. We’re going to do like a weekly thing at some point.

Paige Tamlyn: We should. Everyone is going to be so tired of me.

Brandon Laws: No, they’re tired of me already I think. They hear my voice every week so it’s nice to have another familiar voice, I’m sure. And you’re always bringing the good stuff on the podcast. So I appreciate having you back. What are we talking about today?

Paige Tamlyn: Student loans.

Brandon Laws: Student loans, OK. So let’s pull the thread on that. So there – like a lot of companies are using student loan repayment as a unique benefit.

Paige Tamlyn: Yeah.

Brandon Laws: So we want to pull the thread on that. But let’s first back up all the way. Student loan debt is a humongous issue in the United States.

Paige Tamlyn: It’s a huge problem. So many students don’t know when they sign up for student loans what that actually means.

Brandon Laws: Yeah.

Paige Tamlyn: I saw this video on BuzzFeed. A woman stated, “I was 18 when I signed up for a student loan. I didn’t know anything about it.” She said, “I’m barely making just like the minimum interest payment.” So a lot of students can’t even get to the actual balance of their student loans because they are just paying off the massive amounts of interest.

Brandon Laws: There are so many issues with student loans right now. For one, I think people should have education around what it means to take out a loan. I remember back in 2004, I’m dating myself here, but 2004-2005 when a lot of my friends were taking out loans and they were blowing their loans on like gambling or alcohol and things like that.

Paige Tamlyn: Yeah.

Brandon Laws: So they don’t really understand like …

Paige Tamlyn: Or just even to live.

Brandon Laws: Yeah.

Paige Tamlyn: Like paying – part of like their college but then also just living because they live out of state or they live somewhere else.

Brandon Laws: Yeah. And I’m putting some broad strokes there and I’m sure everybody would treat it that way.

Paige Tamlyn: Well, there are a lot of people that do that.

Brandon Laws: [Laughter] I paid – I think you have a similar story. I paid cash for school on my own. I worked – I would go home on the weekends and work. So I was lucky enough to get out of school without debt. But I know a lot of people that have huge balances.

Paige Tamlyn: That and the thing – the sad part about that is, is like we’re the minority of people that graduated without student loan debt. Most people graduate with student loan debt of a certain sum of money. I was lucky as well to not have any student loan debt. My parents said, “You stay in state. You stay local. You live at home. We’ll pay for your school.” So I graduated from Portland State. They paid for my school. I had no student loan debt. And I worked and paid all my own expenses and living expenses because I lived at home and worked. But very, very few of my friends have no student loan debt.

Brandon Laws: Yeah. Well, especially like I think for people who want to go to a higher end school like a private school, Ivy League School …

Paige Tamlyn: Oh, can you imagine how much student loan debt you would have if you graduate from Harvard?

Brandon Laws: Yeah. Unless your parents are super wealthy or you had some sort of endowment.

Paige Tamlyn: Which this podcast isn’t for you then so go ahead and turn it off.

Brandon Laws: It’s not for you probably. But like I don’t know how parents would even save for that or how a student would even do that.

Paige Tamlyn: I have no idea.

Brandon Laws: So, it’s a big issue. I think what it means is that OK, for one right now, $1.52 trillion in student loan debt.

Paige Tamlyn: Trillion.

Brandon Laws: Trillion. That’s a T. Total borrowers with student loan debt, 44.2 million people. That’s sick.

Paige Tamlyn: That is sickening.

Brandon Laws: And that averages out and just an average, $37,000 in student loan debt per person but as you know like some people would have on the lower end of that but some people are probably in the hundreds of thousands of dollars.

Paige Tamlyn: Well, I imagine the people that go back right after they graduate with their undergrad and go back for a master’s, they have twice that amount of debt.

Brandon Laws: Exactly, yeah.

Paige Tamlyn: If not more.

Brandon Laws: I was talking to someone in my extended family and their son is going back for a second master’s degree. I’m like, “I don’t even know like how you would even consider paying for a second degree.”

Paige Tamlyn: What do you need that for?

Brandon Laws: I have no idea.

Paige Tamlyn: I’m sorry like that seems crazy to me. That’s a whole another podcast of why people need unnecessary degrees but that’s a lot of debt.

Brandon Laws: That’s crazy. I mean I don’t want to knock it because I love education and development but…

Paige Tamlyn: Yeah. But be smart about it.

Brandon Laws: …for me, I am financially so frugal in my life.

Paige Tamlyn: Yeah.

Brandon Laws: But OK, so what does this all mean? Because I boil it down to when you’re – as an employer, you’re trying to attract millennials that are coming right out of school. They have all this debt that they now have to live with. And I think for one, it means likely they are delaying home purchases.

Paige Tamlyn: Yes.

Brandon Laws: Or they just now have a fraction of their paycheck …

Paige Tamlyn: Income. Yup.

Brandon Laws: …their income having to go to something that they probably wish they didn’t have.

Paige Tamlyn: Right. Well, and think about it this way. Most even entry level jobs, you need an undergrad degree for.

Brandon Laws: Yeah.

Paige Tamlyn: So they have to graduate.

Brandon Laws: Yeah.

Paige Tamlyn: So you don’t really have much of a choice with that unless you’re going to a vocational school or some other form of education like that. But – so you have really not a lot of choice if you want to get a certain level of position when you graduate. And then you have all of this debt. So – and millennials are not good – we’re not good at saving money. I’m going to say that because I am a millennial.

Brandon Laws: You’re over-generalizing. Come on.

Paige Tamlyn: I’m overgeneralizing. But I would say most, myself included. I’m not great at saving money. I spend it all – I like my vacations and that’s what’s important to me. But I also bought a home so that also was important to me. But most of my friends are like, “Yeah, I pay off my student loans,” and like that seems like enough. And I ask them, I’ll say, “Well, what about like 401k? Do you have an IRA? What’s your plan for that?”

Brandon Laws: I think I was talking to you about all that.

Paige Tamlyn: And it’s just silence. And I’m like, “What are you doing?” I understand that we’re in our mid to late 20s but people need to think about their retirement sooner than you actually think you do. And so the fact that employers are getting really crafty with how they are setting up their benefits plans and offering things to people. It’s smart. It’s really smart.

Brandon Laws: Yeah. I mean this is a big issue just because I think it puts pressure on employers because if people are living with this amount of debt, they are going to naturally ask for more money to live, right? They got to pay for rent. They want to buy a home. They want to start a family. I got to pay off my student loans. And that requires a higher wage.

Paige Tamlyn: And then the employers are saying, “Well, OK, I’m going to bump up your base range to be competitive but I’m also paying X amount for your health insurance, because health insurance costs are going up. But I’m contributing this amount to your 401k.” And that’s where it’s missing the mark is that they don’t understand that might not hit home with them right now because they need that to pay off their student loan debt.

So there is this company – I shared this article on LinkedIn with my group and we’re talking about this employer that said, “If you are contributing at least a certain amount to your student loan debt,” and they actually allow it to be done internally through payroll deductions, which is very unusual. So if you do it internally through payroll deductions at least 2%, they will match 5% into your 401k on your behalf.

Brandon Laws: Fascinating.

Paige Tamlyn: So then they’re not having to make a choice.

Brandon Laws: Best of both worlds, yeah.

Paige Tamlyn: Yeah.

Brandon Laws: That’s what I would worry about is the trade-off effect.

Paige Tamlyn: Yeah.

Brandon Laws: You’re going to miss out on compounding interest if you don’t start contributing into your retirement plan right away.

Paige Tamlyn: Or your employer match, so if you’re an employer match and let’s say you contribute 5% but somebody is only doing 2%, that’s money you’re leaving on the table. So if you can meet them halfway and say, “OK, why don’t you put 2% towards your student loans, you put 2% towards your 401k and we’ll match the other 3%.” There are lots of easier ways that employers can do it instead of just saying, “We’ll pay all of your 401k match.”

Brandon Laws: Yeah.

Paige Tamlyn: You could kind of like ease into this a bit.

Brandon Laws: I think what’s really fascinating about this – because this benefit is really popping up a lot. I’m hearing the LinkedIn article you shared plus I’m just sort of seeing it in the headlines – because millennials are typically still in their parents’ health insurance, I think this offers a pretty unique benefit that employers can offer because if they’re not – if those millennials are young enough to where they are still in their parents’ health insurance, they are not on the group health plan. They don’t have to offer …

Paige Tamlyn: Yes, they are not costing you the money.

Brandon Laws: Not costing any money.

Paige Tamlyn: That’s like 500, 600, 700 bucks depending on what plan you have.

Brandon Laws: It’s huge. It’s way more than what I’ve seen in some of these articles about possibly contributing to the student loan repayment and maybe a couple of hundred bucks a month.

Paige Tamlyn: Well, exactly. And that – yeah, that frees them up and then think about if you’re not having to shift their base wage because you’re not contributing to their take-home pay. You’re just not taking away from it because they are not having to disburse it to the student loan payments and every other bill that they’ve got, all their Netflix and Hulu and all that stuff they have to have.

Brandon Laws: Got to have those, of course.

Paige Tamlyn: You know what? Essentials. Essentials.

Brandon Laws: Well, we need to escape life once in a while.

Paige Tamlyn: It’s true.

Brandon Laws: Just zone out.

Paige Tamlyn: Yeah.

Brandon Laws: Yeah. A couple of things I wanted to mention is when I said this just as externally, I always want to make sure I cite my resources. So there is a Forbes article that had all of the data on student loan debt. So I’ll put a link up to that in the show notes.

And then there’s another couple of things I want to talk about. There’s a CNBC article about how hundreds of companies in the United States are really starting to do this, student loan repayment as a benefit. And they had a couple quotes from actual people who were in this program with one of the companies and they said, “It’s as meaningful to recent graduates as 401k’s.” And I believe that.

Paige Tamlyn: Like let that set for a second.

Brandon Laws: Let that sit.

Paige Tamlyn: Let that – I’m just going to pause. That’s incredible.

Brandon Laws: Yeah.

Paige Tamlyn: That’s how much it means to people who have student loans. And I say millennials in a broad sense, there are people that are outside of the millennial group who go back to school. So think about those people too who are paying off their own kid’s student loans. So there is…

Brandon Laws: Absolutely.

Paige Tamlyn: It’s a wide span of people this could affect.

Brandon Laws: I know like when people have large amounts of debt, they get paralyzed by making decisions in their life. So this is one of those things if you just have a little bit of help or feel like you’re getting rid of it.

Paige Tamlyn: Just chip away at it.

Brandon Laws: Chip away, yeah.

Paige Tamlyn: What’s that – I can’t remember who it was that has the snowball effect for paying off debt.

Brandon Laws: Dave Ramsey.

Paige Tamlyn: Yeah. So I mean like that’s sort of what you’re doing as an employer – you’re helping them become more financially stable.

Brandon Laws: Here’s an excerpt from that article I mentioned. So it says, “For example, if someone has a student loan balance of $26,500 on a 10-year repayment term with a 4% interest rate, a $100 per month contribution from his or her employer would free them from their debt three years earlier.

Paige Tamlyn: Three years.

Brandon Laws: That’s a hundred bucks, a hundred bucks a month.

Paige Tamlyn: A hundred bucks. And most employers probably do more than a hundred bucks.

Brandon Laws: Oh yeah. Yeah. So it seems like a really unique benefit that could work.

Paige Tamlyn: This could affect you in so many other ways. I mean think about – so if they are then freed up to be able to purchase a home, be closer to your office, or there is just – there are so many other things. They could buy a car and not have to take public transport.

Brandon Laws: Yeah.

Paige Tamlyn: There are just lots of other things that people can do with freed up income.

Brandon Laws: Yeah. You mentioned earlier about like OK, if we – if employers are offering just a higher wage, what’s the likelihood that a person who has a student loan balance would actually contribute more to paying down that balance?

Paige Tamlyn: Very small.

Brandon Laws: Yeah. I think that’s why a benefit like this is unique because we naturally think like, “Oh well, everybody is smart enough to do that. They would get – they would earn more money and income and they would use that cash to pay down their balance.” But that’s just not the reality.

Paige Tamlyn: No. It’s just like what we say with the 401k. If you don’t have a formal 401k set up, people are not likely going to go ahead and just set one up on their own unless their parents instill in them that kind of financial foundation for a goal.

Brandon Laws: That’s why like – think of auto enrollments are really starting to pop up a lot more just automatically.

Paige Tamlyn: Well, think about OregonSaves. That’s a huge plan because there are lots of people who don’t think about that. So if you’re an employer who wants to be competitive in your benefits but also wants people to be financially savvy, set them up for success and have them keep going and maybe it’s you say, we’ll pay 2% of your student loan for that month that you also have to pay 2%. Have it be a match. Like have him buy into it with you.

Brandon Laws: So how do you think an employer could get into the really HR piece of this? How do you think an employer can set this up? Like what in your mind would – what would you advise and this is no – we’re not advising people on this podcast but if you had your own business, how would you set this up?

Paige Tamlyn: I think it depends on how you’re wanting to recruit and how you’re wanting to set yourself up in the market. So if you are recruiting heavily in that millennial generation and you need to be competitive with other companies, I would say that you need to assess how much student loan is probably common for the geographic area that you’re in. And I would say the best way would be – you don’t even need to necessarily have it done through payroll deductions like I mentioned before. That’s the easiest way for them because then there’s just no excuse. But I would say have them meet you halfway.

So, however much percentage you want to contribute, we’ll match that – and you can say up to 5% or 6% like you would do for a 401k and then double up and say, “OK, whatever you – we contribute for you, so if it’s 3% into your student loan, we’ll do the same for your 401k.” Because then they’re not missing out on that. And you can cap it either way you want but it gives you some freedom to say, “We’re going to help you meet halfway.”

Brandon Laws: Yeah. I think this could be a really interesting thing. Just go negative for one second here. And this is not an economics podcast. I worry about incentives that you create because I don’t know if it really gets to the root cause of just how tuition is so high and how people are taking …

Paige Tamlyn: No. We’re not solving that problem.

Brandon Laws: We’re not solving that problem.

Paige Tamlyn: That’s a another whole problem.

Brandon Laws: And it’s kind of like – so I worry with this is that then you – if somebody else is paying your loans off for you or not really paying them off but contributing, you don’t take as much ownership of it.

Health insurance is the same way. A lot of us don’t really know what costs go into health insurance because it’s run mostly through employers and these group health plans. So I worry with something like this that it sounds really good as a benefit but I would be remiss in not saying the downsides to this is just you create a monster.

Paige Tamlyn: Well, it’s true and it’s open communication. So if you’re a company that doesn’t do total compensation statements every year, so I’ve been throwing those around a lot with my clients recently because it shows you down to the dollar, every line by line. We just did them for the client that I work out with.

Brandon Laws: Including taxes?

Paige Tamlyn: Yes.

Brandon Laws: So taxes…

Paige Tamlyn: Well, I don’t show…

Brandon Laws: …employers would pay on your behalf.

Paige Tamlyn: Not necessarily. So if it’s a tax that they’re going to get anywhere else like paying social security tax, they’re going to get that anywhere. That’s not really a benefit. I’m talking about how much their base pay is, how much if you have incentive comp, how much you pay towards their health insurance premium especially if they are enrolled in family coverage? That’s a huge amount that …

Brandon Laws: Oh, it’s humongous.

Paige Tamlyn: Yeah. 401k contributions, how much you’re paying for a match, every single PTO, holiday pay, all of that stuff line by line and showing them how much their actual hourly wage is or how much their actual salary is at the end of the day is a huge benefit because it really shows them, “Wow! I didn’t know that they are paying this much for my health insurance premiums.”

Brandon Laws: Yeah. I think that would actually, just based on what you’re saying there, I think that would solve a lot of my just worry about creating bad incentives with something like this. But that would help a lot.

Paige Tamlyn: Yeah.

Brandon Laws: Yeah.

Paige Tamlyn: You just got to be like open about it and be transparent.

Brandon Laws: Yeah. So where do you think this is all going. It’s kind of a trendy thing right now. Do you think it’s going to catch on?

Paige Tamlyn: I think that the more often that companies need to be competing with each other for talent when an employment is so low, I just looked at it’s like 3.7%.

Brandon Laws: Unreal.

Paige Tamlyn: It’s unreal right now. The more competitive you can look in the market, the better off you’re going to be. So if you are looking for people who probably had to be in school, especially for a really long time like the programs you’re looking at people have to be in for four, five, six years, they’re going to have a lot of student loan debt.

Brandon Laws: Yeah, well-said. Well, this is a fun discussion. I mean I think there’s more to come on this honestly. It’s just really fun to be able to just kind go back and forth and talk about what if, what if employers start offering benefits like these because your point is spot on. You have a competitive market, labor tight, labor shortage is real. It’s really tight out there. And …

Paige Tamlyn: And across the board, every other student is feeling it. No one is immune.

Brandon Laws: The only way you’re going to either attract people or retain them is having benefits like these and obviously having a really good purpose and vision for your organization. So I think this couldn’t hurt.

Paige Tamlyn: No.

Brandon Laws: It can’t hurt at all.

Paige Tamlyn: Give it a try. Hit me up.

Brandon Laws: Yeah.

Paige Tamlyn: I’ll help you. [Laughter]

Brandon Laws: Paige, thanks for coming on the podcast.

Paige Tamlyn: Thank you so much.

Brandon Laws: Where can people connect with you?

Paige Tamlyn: You can find me on LinkedIn. You can find me on the Xenium website. Send me an email.

Brandon Laws: Right. Sounds good. Thanks, Paige.

Paige Tamlyn: Thank you.

Brandon Laws

As Director of Marketing, Brandon Laws leads all marketing efforts for Xenium, providing oversight on all marketing campaigns, digital marketing strategy, events, sponsorships and public relations. Brandon brings a positive energy to every aspect of his role at Xenium—from internal initiatives around culture and wellness to industry thought leadership through the Xenium podcast and other social efforts. Active within the HR community, he currently volunteers on the board of the Portland Human Resource Management Association as the Director of Marketing & PR.

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