Driven largely by deficit concerns and shifting funding priorities, federal and state support of grant and scholarship aid has decreased over the past 10 to 15 years or, at best, remained level with inflation. Besides helping companies attract well-educated employees, LRAPs can also reduce hiring and training costs by encouraging good, young staff members to stay with the company. LRAPs may be particularly valuable to the many New England companies that find it a challenge to diversify their workforces. A study in the early 1990s showed that offering a loan repayment assistance program is more attractive to non-White employees who, in many cases, had to borrow in greater amounts than their White counterparts. LRAPs also benefit companies by improving their external image.
Government can also strengthen the partnership.
A federal bill developed by Nellie Mae would expand cafeteria-type benefits plans to include student loan repayment as an eligible covered benefit. The proposal would enable recent graduates to redirect part of their flexible benefit dollars to student loan repayment. Without changes in the law, there are obvious tax liabilities to a company or employee in offering student loan repayment assistance as a one-time or annual bonus. But companies should not wait for Congress to consider and pass the type of proposal described above. Companies that offer to help pay back student loan debt now can expect immediate returns in terms of increased employee commitment.