Student loans are a tremendous burden on younger workers. According to figures compiled by the Institute for College Access & Success, roughly seven in 10 seniors who graduated from public and private higher learning institutions in 2014 had a debt burden of $28,950 per borrower. Between 2004 and 2014, the percentage of graduates with debt rose from 65 percent to 69 percent.
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To put the year over year increase in perspective, the average student loan in 2015 skyrocketed to $35,000, according to research published by Mark Kantrowitz at Edvisors, a college planning service.
Student loan debt has also had a crushing effect upon entrepreneurs. A study conducted last year by the Federal Reserve Bank of Philadelphia showed a correlation between increased student loan burdens and lowered entrepreneurship. Student debt reduced entrepreneurship rates by 14 percent, according to the Fed report.
But smaller companies can turn a potential liability into an advantage. From new regulations introduced in the U.S. Senate and the House of Representatives to additional market resources and participants, the student loan burden will soon be a load that small businesses can lighten just as well as their larger counterparts.
Legislation introduced by Democratic Sen. Mark Warner (D-Va.) Virginia is aimed at helping small businesses alleviate the student debt of their employees. The Employer Participation in Repayment Act would update existing federal guidelines for employers and student loans.
Currently, the Employer Education Assistance Program allows bosses to contribute pre-tax earnings to help their employees finance continuing education, but it does not allow relief for debt they already incurred through their undergraduate or graduate education. Under the new act, employers could contribute up to $5,250 of pre-tax income to help their employees offset their federal or private student loans.
Business owners can help ease their employees’ student loan burden in other ways, too. Using business funding as part of a “Key Man” strategy can help retain vital employees as well as fulfill secondary objectives like providing insurance or additional business capital.
Speaking on the plight of employees, Original Funding’s Jed Morey said a growing number of businesses are taking the issue seriously. His company provides business funding services and advice to small businesses.
“One constant in the labor market is that talent remains steadily employed,” said Morey. “So while unemployment figures remain high relative to the overall labor force and many Americans have ‘dropped out’ of the available workforce, highly skilled workers have negotiated small, but steady increases in wages, benefits and perks.
“Knowing that student debt is an entrenched issue for young American workers in particular,” Morey explained, “businesses have rightfully identified the elimination of student debt as a strong recruitment and retention tool.”
If the Employer Participation in Repayment Act is passed, small companies will have another powerful tool to help recruit and retain their key employees.
Until then, student loan repayment will remain just a perk of the job for some fortunate employees.