It is the season for graduation, so student debt is on my mind. I have a child graduating high school in a few weeks, which means I am thinking a lot about the cost of higher education.
Student debt is out of control – let’s just get that out of the way. Yes, higher education has become very expensive and many people cannot afford the retail costs. Many students do get some forms of financial aid (including scholarships, grants and loans) but many put themselves into way too much debt for an education that may be marginally better than one at a lower cost alternative.
So, in an attempt to attract younger employees (who are mired in this debt) some employers are now helping to pay off their employee’s student loans. Sounds like a great way to attract talent, right?
It could be, but as the article notes, this does not tackle the larger issue of why higher education is so expensive.
Offering this cash pay-off may also create a disincentive for those who are currently debt-free. What if you put yourself through college, working two jobs in the process, and emerged with a degree and no debt? Good for you, right? So, how do your total rewards compare to your peer who accumulated debt? Are you, the employer, rewarding someone more for having this debt? Is that what you want to reward?
I know that student debt is not necessarily a choice, and that these payments really do not amount to a lot for any individual. However, based on the Employer Participation in Student Loan Assistance Act noted in the article, some want these payments tax-free up to $5,250/year (or $437.50/month).
Payments that high can create a bigger total reward gap among your peer employees. This gap may already exist within your organization, depending on which employees cover their dependents (if any) on their health care benefits, for example. In that case, you may be rewarding families more than single employees.
I am more concerned about yet another employer-funded benefit emerging instead of tackling the greater issue of overall cost of higher education (and educating potential students on the true value of higher education at different price points).
That said, tread lightly in this direction, should you choose. It is really hard to take away a benefit in the future, so offer only with this caveat in mind. As we saw with Starbucks recently, jumping too quickly into a response can also lead to a swift backlash.