New Ways to Minimize Financial Concerns that Erode Employee Performance
Research shows that money worries have a distinct negative impact on employees’ ability to perform their jobs. Financial education can help, but new voluntary benefits—such as student loan refinancing—offer employers a more proactive tool for combatting this productivity drain.
If you’ve ever had any doubt that financial challenges affect your employees’ productivity, findings from the 2014 SHRM Financial Wellness in the Workplace Survey may put that doubt to rest.
Conducted among more than 400 HR professionals, the SHRM survey revealed:[wcm_restrict]
- Seven out of 10 HR professionals say personal financial challenges definitely have an impact on their employees’ performance.
- Roughly half report that the two aspects of employee performance most negatively affected by personal finances are stress and the ability to focus on work (50% and 47%, respectively).
- Overall productivity, absenteeism and tardiness, and employee engagement are also affected, according to participants.
Additionally, 62% of the survey’s participants agree that employees are now more likely to raid their retirement accounts for temporary loans than in previous years. And 44% agree that employees are more likely to request a hardship withdrawal from their retirement savings plans.
In response, many organizations offer financial education to their employees. But nearly 30% of the SHRM survey participants have characterized this education as somewhat or very ineffective. In other words, education alone isn’t enough.
A growing number of employers—especially those interested in attracting and retaining younger workers—are going far beyond traditional benefits such as 401(k) and supplemental health, life, and disability insurance. Today, packages commonly include discount perks, employee purchasing programs and one that addresses the challenge of repaying student loan debt: student loan refinancing.
Of the financial stresses employees face, student debt is among the more significant, pernicious and weighty. College graduates regularly enter the workforce with $40,000 to $60,000 of student debt. The average debt for MBAs and attorneys is twice that amount. And once these debt-laden graduates enter the workforce, it’s nearly impossible to refinance those loans at more equitable rates—despite their change of circumstance.
That’s why student loan refinancing programs are considered a win-win. Workers are relieved to find a way to save thousands of dollars on their debt, and employers are viewed as part of the solution.
Benefits for Employers
There are a number of reasons why student loan refinancing is on the rise as a voluntary benefit:
It significantly enhances a total rewards strategy. Evidence shows that voluntary benefits—especially financial wellness benefits, such as student loan refinancing programs—are increasingly important to a total rewards strategy. A 2013 Towers Watson survey found that the percentage of employers expecting voluntary benefits to be very important to their rewards strategy will jump from 21% in 2013 to 48% in 2018. And a 2015 Benefits Pro article noted that, in years to come, the most popular non-traditional voluntary benefits are likely to be focused on financial wellness.
Student loan refinancing also indirectly addresses other financial goals such as increasing employees’ 401(k) contributions and participation rates in vision, dental, and short- and long-term disability programs. Without the savings provided by refinancing, many younger workers simply can’t “fund” these important programs.
- It bestows ’employer of choice’ status. Like other valued benefits, student loan refinancing can help employers distinguish themselves in the marketplace, thus attracting and retaining top talent more effectively while also raising employee engagement, satisfaction and loyalty levels.
- Student loan refinancing programs can be effortless and cost-free to administer. SoFi’s program, for example, is available to employers at no cost, and SoFi handles all communication with employees.
Benefits for Employees
For borrowers, the benefits of student loan refinancing are four-fold:
- Serious savings. Reports show refinancing can save borrowers approximately $12,000 dollars over the life of their loan. In addition, some refinancing programs charge no application or origination fees and forego prepayment penalties.
- Greater financial freedom. Borrowers’ improved financial situations allow them to fund or increase their contributions to other financial programs their employers offer such as 401(k) programs and health savings accounts.
- Debt consolidations. Borrowers may be able consolidate their existing loans—regardless of the sources—into a single loan with one monthly payment.
- Borrower protections. Borrowers who experience financial difficulties or who are terminated from their jobs through no fault of their own may receive assistance from their refinancers.
The Ultimate Win-Win
Given the widespread stress and distraction that student debt is creating among America’s workforce, it’s no wonder student loan refinancing is gaining favor with employers and employees alike.[/wcm_restrict][wcm_nonmember]
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About the Author
Dan Macklin is a co-founder and vice president at SoFi. He is a thought leader whose perspectives on Gen X and Millennial personal finance topics have been featured in a variety of media outlets including CNBC, Fast Company and Mashable, as well as his personal favorite, Italian Vogue!
SoFi is a leader in marketplace lending and the largest provider of student loan refinancing, with over $2 billion in loans issued. SoFi helps ambitious early stage professionals accelerate their success with student loan refinancing, MBA loans, mortgages and personal loans. Its nontraditional underwriting approach takes into account merit and employment history among other factors to provide unique financial and investment products. Borrowers who refinance their student loans with SoFi can expect to save $11,783, on average, over the lifetime of their loans. For more information, visit SoFi.com.
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