There appears to be no end in sight to the rising level of debt Americans incur from a four-year degree, let alone the cost of earning an MBA from top business schools. But, that challenge may present an opportunity to hire the front-running candidate for your marketing or market research job.
Business schools have reported, conservatively, that the total cost to earn an MBA degree could exceed $200,000. And that may be a conservative number. Tuition fees at most schools increase between three and five percent for the second year, and living costs often end up being 10 to 20% higher than what most people estimate. Factor in the cost of quitting a job for two years while attending school, and the total price of an MBA could easily approach $350,000.
In medicine, student loan forgiveness benefits have evolved from being a special incentive to being an expected component of the recruitment package for physicians. Now, to fill marketing and market research jobs in an increasingly competitive landscape, educational loan repayment is rising to the forefront in the business sector as a negotiating tool to attract the best candidates from top MBA programs.
How Loan Repayment Programs Work
Student loan forgiveness programs as employee benefits are new, so the book is still being written on how such initiatives are established and implemented. But there are some general guidelines:
- An employer agrees to pay a specific amount toward an employee’s student loan debt, or reimburses them for up to a specific amount of what they pay toward their loans in a given year. For example, PricewaterhouseCoopers will pay up to $1,200 a year for six years. Financial firm Natixis Global Access Management will pay a $5,000 lump sum to employees who have been with the company for five years, and $1,000 on every work anniversary for up to five more years.
- Eligibility varies from company to company. Generally, a person must be employed for a set amount of time and make regular payments on their own, as well. Some plans cover only federal student loans.
- This is not a tax-free benefit. While up to $5,250 a year can be provided tax free to an employee for tuition reimbursement, student loan reimbursement under current IRS regulation is taxable. An employer may deduct the tax directly from the payment or from an individual’s paycheck. Or, the employee may be responsible for it when they file their annual tax return.
Good for Employers
Employers see loan forgiveness as an opportunity to differentiate themselves with top talent by providing a meaningful way for their employees to reduce debt and thus improve their overall lifestyle. Because it is still new in most sectors, this strikingly attractive benefit could offer a significant differentiator, positively impact retention and play a big role in boosting a company’s brand and reputation.
- According to the Society for Human Resource Management’s 2015 Employee Benefits Survey, only 3 percent of U.S. employers currently offer company-provided loan repayment. While a 401(k) match is great, employees may have 40 years or more before they retire. If they are making $40,000 or $50,000, loan forgiveness can mean the difference between making rent, much less building a nest egg.
Good for Employees
Student debt weighs heavily on the minds and plans of many professionals. In the United States, student loan debt has surpassed a record $1.3 trillion. On average, a student borrower who graduated in 2015 owes $35,000.
- In one 2015 study, 35 percent of millennials who do not contribute to a company-sponsored retirement plan cite the need to pay off student loans as a factor. Many workers in their 40s, 50s and even 60s also have student loan debt. Having this stress alleviated is a very attractive benefit.
- 76 percent of respondents to the American Student Assistance “Life Delayed” survey agreed that their choice of whether or not to accept a job would be considerably affected based on an employer’s willingness to offer a student loan repayment program.
The executive search experts at O’Connell Group provide innovative solutions and strategies to match high-potential candidates with leading employers in the consumer packaged goods, marketing and marketing research arenas. Read our related posts or contact us today to learn more.