College graduates are entering the workforce with student loan debt averaging about $35,000. Some are finding a new partner in paying those huge monthly bills: their employer.
Large companies such as health insurance giant Aetna Inc., Fidelity Investments and Estée Lauder have announced they are providing money toward student loans as part of their employee benefits package.
Gradifi, a vendor offering employers a student loan benefit platform, says more and more companies are adding this benefit to their portfolio. In February alone, 20 employers — including 3Q Digital, HLB Lighting and Renewal by Anderson — offered the education loan repayment benefit to their employees.
“Demand for Student Loan Repayment programs continues to grow because employers increasingly see the benefit of offering student loan debt relief to employees,” says Tim DeMello, Founder and CEO of Gradifi. “A student loan repayment program gives employers a distinct competitive advantage in attracting and retaining employees.”
Student loan debt is the fastest-growing form of consumer debt in the U.S., DeMello adds.
“As recent research shows, working professionals with high student debt payments face an ‘unprecedented financial challenge,” he says. “Employers who offer a student loan repayment benefit not only provide meaningful relief to their employees, but also gain a clear competitive edge in recruiting and retaining an engaged and empowered workforce.”
“As a progressive organization, we want to be offering the benefits that our team wants and that will make the most impact,” sayes Charles Starnes, Partner at Mothership Strategies, a D.C.-based consulting firm, which partnered with Gradifi. “Employees at Mothership can now get out of debt years faster. Already we are seeing the stress of those loans start to ease.”
Seth Burr, co-founder and COO of Boston-based LABUR, says offering this plan to his employees was a no-brainer. “If we have associates who are distracted by thoughts of things like how they are going to pay off their student loan debt, they are less focused and less likely to be as successful as they could be if they didn’t have the stress of those outside thoughts,” he says. “We established LABUR as a way to influence how other people achieve success. This is a tool to help us do that.”
A matter of interest
For an employee with a loan balance of $26,500 — the median amount borrowed for a bachelor’s degree — a $100 per month employer contribution for a loan at 4% over 10 years would save over $10,000 in principal and interest. The employer contribution would result in a 30% reduction in total payments, and the loan would be paid off three years faster, according to Gradifi.
While Gadifi has seen recent growth in employers picking up this perk, only 4% of Society for Human Resource Management members say their organizations offered this benefit in 2017, the same percentage that provided this assistance a year earlier and just one percentage point more than offered it in 2015, according to the SHRM 2017 Employee Benefits Report.
For employers looking to put in place a student loan benefit program, PricewaterhouseCoopers, which launched a student-loan assistance benefit for its employees in September 2015, pays $100 per month for a total of up to $7,200, according to SHRM.
Mike Fenlon, consultancy PwC's chief people officer, provides employers the following steps for putting a program in place. First, any program needs to be easy for employees. Employees responded favorably to an arrangement that limited the amount of paperwork they had to do.
“PwC pays directly to the loans through a third party vendor, so that staff does not have to handle the payment each month,” Fenlon says. “It's seamless and staff tell us they love that.”
Second, benefit administrators need to clearly outline the pros/cons. An employer's student loan payments are taxable income, and employees should understand this before they sign up so they aren't surprised at tax time.
“We anticipated negative feedback from employees who do not have debt,” Fenlon says. “We did not experience that. In fact, even employees with no debt told us they felt proud of the pioneering benefit."
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