Student loan repayment program
Students Loans are a type of financial aid that students can use to pursue their college , university or professional education. However they differ from other kinds of aids like grants and scholarships in essential one aspect This being a kind of debt needs to be paid back, that too along with the interest within a predetermined period of time. Though in most countries this is issued by the Government, private loans are also available being extended by private banks and other financial organizations. Though these loans might have a higher limit and other advantages they also come with a higher price (or the higher rate of interest).
While this loan helps students and their parents realize the dream of completing education with much ease, the repayment part too needs to be taken care of. Though these loans come with a lower price than other kinds of loans, with rising cost of education, many students are overwhelmed by the debt they carry at the beginning of their work life. I remember a relative of mine calling me up one afternoon in all excitement that she has got through one of the most coveted universities to pursue her MBA university. However all the excitement vanished when the financial figures hit her. Much to her dismay, she realized that inorder to repay her loan debt, she would have to work without any savings for atleast 2 years even she manages to bag one of the top jobs.
As much as the debt burden is a concern for the students or the fresh graduates, it is also a concern for the employers, more so for the government agencies. The qualified and the skilled employees leave organizations for more financial gains leading to high recruitment and retention costs for the employers. Realizing the mutual benefits, many employers are now coming up with the concept of students loan repayment programme as an effective tool to recruit and retain their employees. The programme being still in its nascent stage, there is no comprehensive set of rules and regulations available to find the eligibility of the employees. Neither are there any written down procedures for the operational aspect. In most cases the employees need to qualify to enroll for the students loan repayment programme based on certain parameters given by the respective organization, though some also look into the eligibility on a case-to-case basis depending on the result they are trying to achieve. The operational aspect in most cases is time consuming and cumbersome.
Employees wanting to take advantage of the programme generally have to get into a written service agreement with the organization to work for a specified number of years. Also there is a cap on the maximum loan amount per annum as well as the maximum total loan amount that would be paid by the organization. The payment is made directly to the lending institute by the employer on behalf of the student after deducting the necessary income and employment taxes. All these require a lot of operational efficiency and addressing the most important question of whether such an investment would actually prove beneficial for the organization.
The organizations need to interact with a large number of lending institutes to verify the eligible loan of the proposed employees, the outstanding balance and ensuring that the repayment goes towards payment of the correct loan outstanding. This requires officials to have a good understanding of students loans and the entire procedure may take upto 3 months before the actual disbursement is made. Since no additional funding is available by the organizations to implement such a programme, they need to allocate fund for this from their existing sources. Though there are no comprehensive data as of now to show the effectiveness of this programme, anecdotal evidence indicates that employees do value this programme. However to make this programme a long term success streamlined and efficient administrative machinery needs to be put in place.
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