What if I told you that a relatively slight modification to your company’s existing 401(k) program could drastically improve employee participation rates while also chipping away at two of America’s crippling financial issues?
According to a recent game-changing IRS private letter ruling, one company was approved to do just that—and so can yours.
Consider this: Americans collectively hold a massive $1.4 trillion in student loan debt. To put this in perspective, total American credit card debt is $0.8 trillion. Now here’s another number for you. A staggering $24 billion in 401(k) employer matching contributions is left unused annually. The latter is, in large part, due to the former. Pew revealed that only 52% of Millennials participate in employer-sponsored retirement plans. It makes sense: employees burdened by student debt aren’t always able to make student loan payments and also contribute to 401(k) match plans.
So they don’t.
But—thanks to the new IRS ruling—employees of any participating company who are unable to contribute won’t have to forfeit saving for retirement. Here’s how it works: the participant simply agrees to allocate at least 2% of their salary to student loan payments, and their employer, in turn, contributes a generous 5% to their 401(k) fund. This is a generous percentage, of course—it’s important to note that each student loan benefits program can be structured individually between a company and its benefits program sponsor. Since it’s an elective benefit, employees without student debt or who prefer traditional plans aren’t affected.
It’s time more companies make a similar move to better allocate untapped 401(k) match funds.
By implementing a student loan benefit, employers gain an advantage in attracting top talent fresh out of top universities, as well as well-established professionals still working to pay-off student loans.
Employees who were previously unable to build retirement savings due to student loan payments are now able to do so.
And benefits program sponsors, such as T. Rowe Price and Prudential, will have more funds coming into their accounts.
One of the biggest obstacles in the way of student loan benefits programs becoming more commonplace is IRS restrictions and rules, which don’t account specifically for student loan benefit programs.
But as more companies have pushed to implement them, the IRS has finally addressed what is and isn’t legal from a tax code standpoint. And while a private letter ruling only directly applies to the submitting company, this bodes well for other companies looking to submit a similarly designed benefits program for approval to the IRS.
And if your company is considering a students loan benefits program, you don’t have to do it on your own.
Ready to be a game changer? We can help.
Vault (formerly Student Loan Genius) offers complete student loan benefits program management. We help you decide which plan best fits your company and help implement the program. That means we help make the amendment to an existing 401(k) plan, verify employee student loan payments, and coordinate with 401(k) sponsors.
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With total student debt nearing $1.5 trillion in the US, recent graduates are looking for ways to make extra money to pay back their debts. Many people take second jobs, weekend gigs, and side hustles just to help pay back their massive debts.
CareerBuilder found that about 32 percent of workers work a second job to help pay off their student debt.You can save your company money and time by addressing employees’ needs and increasing retention rates. First though, you need to be aware of what employees want.
Companies take many different approaches to entice employees to joining their workforce. Amazon experimented with implementing a 30-hour work week to help reduce burnout among employees, and Netflix even started giving one year of leave for new parents. However, these extra creative perks may not be as enticing as you might assume.
New graduates searching for jobs look for their ability to pay back their loans first. With this in mind, companies need to focus more on providing student loan benefit plans. Student loan benefit plans are one of the most enticing ways to draw employees and keep them long term, and many companies like New York Life and Mastercard have already caught on to the trend.
By providing long-term student loan benefit plans, like Student Loan Genius’ direct loan contribution plans, companies can reduce turnover and keep employees longer. Some independent studies report that losing an employee can cost between 1.5 and two times that employee’s salary. Add this to the cost of finding and training new employees, which can be as high as 25% (depending on your industry’s turnover rate), and the total losses can skyrocket quickly. If you focus on more impactful benefits packages, you can reduce costs for both losing existing employees and hiring new ones. The decrease in turnover will eventually lead to a dramatic return on investment for your company.
When hiring new employees, it’s important to keep in mind what is most important to them. In the current economic state, student debt is one of the biggest concerns. By providing the right solution to this widespread issue, you can help potential employees while reducing costs for your company.
We know HR teams’ focus is on helping employees have the best experience possible at the company, and our goal is to make sure you have this same experience when working with Student Loan Genius. We are dedicated to helping your company achieve the desired ROI. We want to partner with your company and work toward your goals with you.
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So you have to hire your first employee that’s not a friend or co-founder and you don’t have an HR department to vet resumes for you. What do you do?
If you’re like most companies (including large ones), first you’ll create an exhaustive list of all the skills and experiences that might be moderately useful in the position you’re trying to fill. Then you’ll vet hundreds of resumes against that list and invite the candidates with as many matches as possible in for an interview. During the interviews you and a panel of your colleagues will interrogate each candidate about their work experience, looking for subtle reactions from the candidates to divine the true nature of not only their abilities but also their moral fiber. After each interview, you and your colleagues will discuss your impressions and make a hire/no hire decision in the room.
We’ve all experienced a hiring process like this from one side of the interview table or the other. As interviewees, more often than not, we probably leave the room feeling exhausted and misunderstood. But as interviewers, we’re pretty confident that we can pick a strong candidate with such a rigorous trial.
But it doesn’t work, as Google discovered when they evaluated their own hiring practices. After looking at “tens of thousands of interviews” Google found “zero relationship” between the interviewer’s rating of a candidate and that candidate’s ultimate performance at Google. In other words, hiring with a process like this isn’t any better than random chance. You might as well shuffle resumes and pick the one on top.
So is there a better way to hire? Yes. The system above doesn’t work because it relies heavily on our intuitions and thus heuristics and biases. But we can get around these heuristics and biases by creating an algorithmic hiring process, as detailed by Daniel Kahneman in his famous book, Thinking Fast and Slow.
As Kahneman describes, at the age of 21, he was tasked with finding a way to evaluate candidates for combat duty in the Israeli military.
Before Kahneman, the military evaluated candidates based on an interviewer’s holistic impression after a 20-minute interview. And just like the hiring process described above, these holistic impressions had no correlation with a candidate’s eventual success in combat.
Kahneman, based on Paul E. Meehl’s book Clinical Versus Statistical Prediction, believed he could more effectively predict candidates’ success by scoring them on independent, specific, objective tests. To do so he created a simple set of questions to objectively evaluate traits relevant to combat duty like responsibility, sociability, and masculine pride. The interviewers only had to mechanically score the answers to these questions during the interviews. Kahneman then created an algorithm to weight these trait-scores to determine the final overall score for each candidate. As you might have guessed, Kahneman’s algorithmic evaluation of the candidates was more correlated with success in combat than the holistic impressions.
How can you apply this to your hiring plan? Obviously, you aren’t vetting candidates for combat duty, so you won’t care about “masculine pride”. But you should still limit yourself to the five or six most important skills you need and try to find reasonably objective ways to measure them (when I used this technique for hiring Python developers, I counted the number of projects on their resume where they used Python).
After vetting resumes with your important skills measurements, you should replace the traditional interview with behavioral questions for softer skills (like leadership and teamwork) and an actual test of the candidate’s hard skills (like coding or sales). For a coder, instead of asking the candidate to describe heap sort, you might give them an hour to actually code a simple application. For a salesperson, ask might them to do a connect call with you. You and your colleagues should rate the results of the behavioral questions and tests on object scales, like 1-5.
Finally, to evaluate the candidates, simply select the candidate with the highest score. You should only use the objective scores from the resumes and interviews, making sure to weight the resume scores hirer than the interview scores. Do NOT rely on your impressions of the candidate. That will tempt you into hiring the most confident or likable person, instead of the most qualified candidate.
There are many advantages to an algorithmic hiring process. It makes evaluating resumes fast and consistent. It makes sure we consider a candidate’s previous resume and not just their interviewing skills when making our hiring decisions. Finally, it makes it easier to remove stereotypes from our hiring process.
However, if you implement an algorithmic hiring process, you are likely to receive a lot of resistance. Our innate cognitive biases lead us to believe that we are good at looking into a candidate’s eyes and reading their soul. Science clearly tells us we are not. Therefore, it’s critical to structure every step of the hiring process to combat these biases. As Kahneman says, implementing his hiring strategy “requires relatively little effort but substantial discipline”.
But hiring and keeping the best people is probably the single most important long-term decision we make for our companies. It’s worth taking the time to resist our intuitions and think carefully about how to make that decision.
If you need more help recruiting, contact us to design a student loan benefit to meet your recruiting and retention needs.
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Small businesses and employers know the value of a good worker. Great workers who are competent and valuable to your company are worth their weight in gold.
That’s why retaining your best workers is a must in the world of small businesses, where larger and higher-paying companies are all vying for the best talent in the market.
For a small business, high turnover can be a serious drain on resources. Depending on your industry, you may already be continuously looking for new hires. Additionally, losing an experienced worker can be 1.5 to 2 times more costly than that worker’s salary. With the tables stacked against you, small businesses might find it difficult to cope with the costs of replacing and training employees.
Fortunately, you can take advantage of the large student debt crisis to help attract employees and keep the ones you already have. Simply put, providing student loan benefits as a part of the benefits package at hire can be a great way to increase employee loyalty and reduce turnover rates.
Student loan benefit packages are a huge draw for recent graduates who need help paying off student debts. According to a survey conducted by American Student Assistance, about 86 percent of young workers say that they would commit to an employer who helped them pay off their student debts. Student loan benefits can help the employee as well as the company.
Companies offering student loan benefits have a much better chance of retaining and attracting the best workers. Small companies have a lot of velocity, and we want to help you harness that velocity by using our technology and benefit to attract the highest level of talent. As a small business, you may consider this as a worthwhile but expensive benefit package, but it doesn’t have to be.
Vault provides a multitude of services to employees through the employer to help meet their student loan payments. We offer one-on-one student loan debt consulting for employees and a proprietary web tool designed to find the best way to pay off debts, and even help companies set up direct contribution towards their employees’ student loans. If you are interested or want more information, contact us today.
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KIPP Houston believes in a simple commitment: teaching their students to work hard and be nice.
For the last 20 years, KIPP has become a national leader in the movement to provide all children with access to an excellent education, now having over 200 schools and educating nearly 90,000 children.
With this commitment in mind, it makes sense why KIPP Houston would want to offer Student Loan Genius as a benefit to help their graduates reduce their student loan debt and get the financial help they need.
Some of their graduates have over $50,000 in student loan debt; some have over $70,000. Reflecting on this issue, Jesse Hendrix, Director of College Persistence at KIPP Houston, states, “Student loan debt here in America is a very, very incredibly intense challenge. Some of the work that we’re doing here is working with folks like Student Loan Genius to figure out how we can position students in the best way to optimize their debt.”
“It’s a very, very complex landscape to navigate, and going in alone, we understand that that’s not always the best way to do this. If we can leverage any expertise, as in Student Loan Genius, that’s what we’re here to do. Getting in front of our KIPP alumni and giving them access to these resources, I think will be incredible in the fight for helping our alumni get to the point of financial freedom so that they can live the life they want.”
You can watch the full case study video on the impact KIPP Houston is having by offering Student Loan Genius to help their alumni manage and reduce their student loan debt below.
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The cost of tuition for degrees continues to rise, seemingly without an end. The U.S. Department of Education provides statistics that are neither shocking nor comforting
It reveals the continued trend of ever increasing cost of college education. Forbes recently reported that student debt has now become the second highest consumer debt category after mortgage loans. As students come out of college and seek employment, finding the right job that can help reduce this burden becomes crucial.
Due to the current debt trends, it comes as no surprise that college graduates are now taking up side jobs just to help pay off their debt. Under such conditions, most new employees judge their job satisfaction with their ability to pay off mountains of debts and bills. Vacation time, work from home policies, health insurance, and competitive salaries may not be enough to satisfy many recent college graduates.
By focusing on helping employees pay off their debt, you directly address a crucial concern. This appeals tremendously to new employees, in turn reducing turnover and improve retention rates. In the long run, this approach leads to company-wide savings and increased revenue.
Student loan benefits provide multiple benefits to the employees through their employer to help them tackle their debt. The benefits that Student Loan Genius offers includes one-on-one debt consulting and web tools backed by proprietary Loan Brain Algorithms that model payoff plans based on the employee’s current situation and future goals. Perhaps the most attractive benefit Student Loan Genius provides is the ability to directly contribute towards employees’ student loans.
The ROI for a student loan benefit plan can exceed 200%. Many teams see the ROI as simple math. For example, about 20% of employees have student loans. A $50-per-month contribution for each employee results in about 5 retained employees. The retention leads to about 201% ROI per year, or about $304k per year. This can make a tremendous difference in the quality of the workers in the company. When employees stay with the company longer, they can valuably grow within the company.
At Student Loan Genius, we want to build a relationship with your company to make sure your employees have all the student loan help they need, while making sure your company achieves the desired retention success.
Workforce demonstrates how important student loan repayment benefits are, reporting that a survey of over 5,000 job seekers ranked a student debt repayment plan as a highly desirable option in a benefits package. This comes as no surprise given that a high student debt leads to lifelong problems. A Gallup poll even confirmed that student loan debts cause a significant decrease in five key long-term measures of well-being, including financial, social, purpose, community and physical health.
It’s not hard to see why graduates need more help than ever with the second highest debt in the country. Job seekers are extremely attracted to job benefit packages that include help like student debt repayment and loan debt consultations. Benefits like these are proven to keep new employees at the company, increase job satisfaction, reduce turnover and ultimately save you and your company time and money. If you are interested in offering a student loan benefit, let us know.
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Paying off student loans is not an overnight process. There’s a lot of mitigating factors – time, money, and daily expenses – that can hold up forward progress.
The good news is borrowers aren’t alone in the fight for financial freedom. Tools and programs exist that help lower payments or demonstrate the impact of different repayment plans. Student Loan Genius helps dot the I’s and cross the T’s by finding new ways to inform and empower borrowers to fight debt head-on.
Vault allows users to easily view repayment programs that could lower their monthly payments. By doing so, users see what federal repayment plans they qualify for and how the plan impacts their loan payment timeline. If a user finds a repayment plan they’re interested in switching to, he or she can download a step-by-step walkthrough guide that walks through how to make the change.
If paying off debt faster is the priority over changing repayment plans, we can help there too. There’s a “Pay Off Faster” tab for users, which allows users to model how repayment time and interest accrued would be impacted by increasing a monthly payment.
Refinancing is also an option Vault can help with. If a user is curious about refinancing their loans, there’s a section in our tool for that, too. Users can see if the qualify for refinancing without actually pulling their credit. Resources are available to lower interest rates on monthly payments, accrued interest, or adjust repayment time – users judge what works for them.
These 3 perks are huge components of what makes Vault great to offer to employees to help them pay down their student loans. Contact us below to learn more.
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The depth of how student loan debt affects lives goes deeper than a number on a statement reminding the borrower that his or her monthly bill is due. Defaulting on student loans can do more than just affect your credit score – it can cripple your job choices.
According to the Brookings Institute, 30% of jobs now require a certification or license in addition to a college degree, but laws exist in 19 states that allow for state agencies to revoke licenses. Ranging from medical professionals to teachers, game wardens, police, and barbers, anyone who needs a professional license can lose it due to unpaid student loan debt. In South Dakota, they’ll even suspend your driver’s license.
While creditors find new and aggressive ways to punish borrowers who default, revoking professional credentials seems a bit drastic and counterintuitive, but yet, some states still do it as a means of punishment, or at the very least, a means to get a debtor on a payment plan.
The average teacher in Georgia makes between $37,000 – $50,000 a year, so saddling them with, in some cases, $1,300 a month student loan repayment equates to a massive portion of their paycheck. Right now, laws exist in ten states prohibiting new K-12 teachers from working until they get on a student loan repayment plan.
For employers, this model is catastrophic. There’s 1.4 trillion dollars in student loan debt floating around America. There’s an inevitability that some of these borrowers are working for hospitals, firehouses, or local police. Yet, these people cannot work – not because of lack of skills or training, but because a rigid system of repayment doesn’t work in their favor.
One of the biggest misconceptions regarding student loans is the severity of the issue. The average millennial carries around $45-52K a year in student loan debt, which is certainly not a lightweight monthly payment. Student loan debt is the most significant source of income debt, second only to owning a home.
Unfortunately, some of the borrowers in default may not even know they’re in default. It’s possible that with the stress and unpredictability of life their loan statement was lost in time and became an “I’ll get around to it someday” scenario.
While it’s evident that those in default should have consequences for not paying back what they owe, the question needs to be asked: is there a better way? We can’t strip people of their means of making a living. According to the American Nurses Association, within the next five years, there will be a nurse shortage of almost four million nurses. Houston, Texas needs over 2,000 new police officers. Firefighters are in short supply in Kentucky, New York, Indiana, and Texas. Punishing people ready to fill these roles impacts local economy, whereas a solution to work with borrowers to find a realistic endpoint would prove to be more fruitful. Collectively, we need to do better.
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Most employees are uncertain what their student loan big picture looks like. Vault has the answer.
With our platform, users can view their monthly payment, total debt amount, interest, and repayment plan for all of their loans right in the Vault portal.
Like all things Vault, we wanted the user experience to be super clean and super simple. No one wants to dig through pages and tabs trying to understand what this loan means in correlation to overall debt, so we cut out all of the confusion by allowing all the information to be viewed in a single dashboard.
There’s information to potentially help lower an employee’s monthly payment, see how he or she can pay off your loans faster, or check to see if refinancing makes sense.
Depending on an employees’ financial goals, they can each decide what’s best for their situation and future. If you’re interested in offering Vault to your employees as a benefit, contact us.
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VAULT is here for your team.
We want to help every user win the war against student loans and we do so by empowering borrowers with every option available to them. Employees can connect with Vault and schedule a one on one advisory phone call or just drop us an email.
We’re here to help all your employees crush their student loans. We believe that being there for our users is paramount for the best experience. No machines or auto-responders, just humans ready to help. No one wants to talk to a machine or leave a message that will sit unanswered. We’ve collected the resources and we’re happy to share everything we’ve got. We ensure that this information is accessible so borrowers can make smart choices to regain their financial freedom.
If email works best for an employee, let us know what’s going on, and we’ll answer questions and share helpful resources to get the user on the right path. If an employee wants to schedule a call, our support team will walk him or her through loans, goals, options, or help with troubleshooting Genius Advisor.
Student loan debt is stressful. Let us help your team. If you’re an HR person, don’t hesitate to ask questions, we’ll do our best to provide whatever answers you’re looking for.
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