Major changes associated with expanding higher education provision have increased the levels of debt held by millennials as they enter the labour market, as well as the number of people affected by such immediate debt.
Projections have shown that graduates will be paying off student debt well into their 40s and 50s, with only 5% projected to have paid off their student debts in full by age 40; and middle-income earners likely to pay the most back, according to the Payback time? Student debt and loan repayments: What will the 2012 reforms mean for graduates? research by the Institute for Fiscal Studies (IFS) and Sutton Trust, published in April 2014. In this context, it is not difficult to understand why more organisations are using student loan repayment assistance as a financial incentive to attract key talent, rather than relying on the appeal of more traditional benefits such as pension contributions and generous holiday allowances.
Such assistance may be offered in the hope that it will influence graduate decision-making, but it is also linked to an acknowledgement that a strategy on employee financial wellbeing recognises that an employee’s wider financial situation is relevant to their behaviour and performance at work. High levels of student debt, rising housing costs and the demand to make greater contributions to their pension than previous generations has created a perfect storm of pressures on current and future financial wellbeing for many younger employees. All of this can adversely impact stress and anxiety levels, which can, in turn, affect productivity levels.
Incentives such as student loan assistance can, if in line with an employee’s preferences and needs, contribute to improved retention, engagement levels and perceptions of employers. However, alongside the offer of these financial incentives, there is often an emphasis on the non-financial aspects of the employment deal, which can, perhaps less immediately, contribute to improved employee financial wellbeing, such as career progression, and learning and development opportunities, under total reward approaches.
Catherine Rickard is senior research fellow at the Institute for Employment Studies