Payback's a bitch

Transcription:
Alyssa Place: (00:00)
Welcome to Perk Up!, a podcast about workplace culture and benefits brought to you from the team at Employee Benefit News. I'm Alyssa Place, executive editor at EBN. And over the past few weeks, my colleagues and I have been sharing the stories of businesses that have implemented forward-thinking, covetable workplace policies and benefits, keeping their employees happy and their company's bottom line thriving. Today's our final episode, and we're handing it over to editor in chief, Stephanie Schomer. She's talking to employers about tackling student loans, and why this is the next must-have benefit for new employees.

Stephanie Schomer: (00:42)
Hey everyone. And welcome to today's episode of Perk Up! I'm Stephanie Schomer, editor-in-chief of Employee Benefit News. And today we're going to talk about something that a lot of us have, and that a lot of us hate: student loans.

Stephanie Schomer: (00:58)
According to the Education Data Initiative, near 45 million Americans have outstanding student loans and just over 42 million carry a balance on a federal loan. The same organization estimates that in 2022, the average monthly student loan payment is about $460. And for the average borrower, it'll take 20 years to repay student loan debt. Painfully, 67% of total cost repayment tends to be generated interest, the initiative reports. Even for workers who have reliable jobs and income, that's a significant financial lift that can really alter the effectiveness of your paycheck, and for plenty of graduates that are entering the workforce for the first time and have a limited amount of financial literacy, finding a balance in budget can be an uphill battle. Frank Cook is the product owner of strategic partner development at Esker, an international software company based out of France with American headquarters in Madison, Wisconsin, where Cook works alongside about 200 other colleagues. Cook, who's 35, finished his graduate degree back in 2009. And like so many others, he it on student loans to complete his education. But now, Cook has a secret weapon: His employer offers student loan repayment as a benefit. It's something that makes those monthly payments a bit easier to bear, and has contributed to Cook's long tenure at the company — five years and counting. It's a benefit hee says that more employers should embrace, especially as a fight to recruit young, fresh talent is tougher than ever.

Courtesy of Esker

Frank Cook: (02:27)
Students are looking at, you know, companies that offer this as a benefit because they're looking at going, okay to get this job that might pay $50,000 or $60,000 a year. I have to go to school and I have to take on $100,000 in debt it, so how are you gonna help me pay that off? I don't wanna live in mom and dad's basement forever. You know, that that has a damper on the social life. It has, you know, far reaching effects. When, you know, we have more debt than we're gonna make in one or two year's salary, and we still have to pay rent, food utilities, things like that. And, and the student loans on top of it. So I think this is, it's a great thing to set it apart, to make sure that the company knows, Hey, we, we want you to have this education. And we know that education is expensive. We can't can't tackle the education price part of it, but we can help you offset that cost when you work with us.

Stephanie Schomer: (03:24)
Beginning in 2019, Esker partnered with a startup Goodly, which provides student loan assistance. As a benefit for employees who've worked at Esker up to two years, the company will pay $100 per month toward their loans; for two to three years of service, $125 is a month. And for four to five years of service, $150 a month. For Cook, getting set up with a benefit — the platform of which integrates with a company's payroll — was a breeze.

Frank Cook: (03:49)
I went on and I listed all my, uh, student loan accounts. I have, uh, couple smaller ones from my undergraduate degree. And then I have a couple from my graduate degrees. And there are, there were, is a choice to say, do you want it to pay to the highest remaining balance, highest interest, or do you want to manually select which account the assistance will be put toward? Um, and then I, you know, I said, just pay off the one with the, with the highest, the highest interest rate, you know, just work on that one.

Stephanie Schomer: (04:20)
Cook is one of about 50 Esker employees who have chosen to utilize the program to date. The company has contributed more than $164,000 toward their employees, student loan debts on its face. That can sound like a big number to an organization, but Anne Donarski, Esker's director of finance and administration says it's a small price to pay for a significant ROI.

Courtesy of Esker

Anne Donarski: (04:41)
We want our employees to be healthy, happy employees. And we are in it for the long term. We don't, we don't wanna burn through our employees. We want them with us for the, the 12 years like me or 15 or longer. So we wanna keep them happy and keep them here. Once you start looking at what your payroll costs are and how big those are, these numbers are really pretty small compared to of that. And if it keeps your employees around, so you don't have that turnover factor and in the, the knowledge gap, when you lose people, it's definitely worth it.

Stephanie Schomer: (05:10)
That's right — Donarski has worked at Esker for 12 years, a very long and very uncommon tenure in today's workforce. But at Esker, she explains the long tenures that both she and Cook boast aren't uncommon, and speak to the culture the company's leaders work to prioritize — one that's supportive and considers the many facets of a worker's life. The benefits package is a huge part of that culture, and Donarski regularly puts heads together with Esker's director of HR to figure out how their offerings can stay ahead of the pack. In addition to healthcare and a 401(k) program with what Donarski calls a "considerable match," the company also offers pet bereavement, pet insurance, financial consulting and a $700 wellness benefit that employees can use to purchase equipment or memberships that will support their physical or mental wellbeing. Making student loan or payment part of that package, she suspected would further incentivize folks to stick around. Her instincts, Cook says, were correct.

Frank Cook: (06:04)
Esker cares about the employees and they wanna make sure that there is a, a culture of making sure that they're taking care of they, they have a high, uh, priority on, on work-life balance to making sure that you, yes, you have a job and you are, you know, expected to deliver certain results or perform certain duties at, at work, but at the same time that you have enough, you know, freedom or, or free time, or et cetera, to be outside of where to pursue your hobbies, to make sure that you have enough time to, you know, enjoy life, spend time with your family's spend time with your friends, et cetera. I was talking to my manager about kind of the, the different compensation packages and, and kind of the different ways that people could be compensated. Salary isn't the only thing, but yet, uh, there are other things that can be included as part of that, such as student loan assistance or different kind of perks, if you will, that that come from an employer. So I think this is, you know, something that employers should be aware of as an option when they're looking at, you know, hiring or making offers to candidates that a lot of them are still gonna have significant student loans when they come out. And that this is something that helps set their company apart from other company that aren't offering this benefit.

Stephanie Schomer: (07:19)
As both Cook and Donarski point out, benefits have always been a smart way to attract and retain talent, but in the wake of the pandemic-induced great resignation, which has seen millions of employees choose to walk away from their current roles since 2021, a record 4.5 million quit in November alone, benefits have never been a more vital tool in a comes to winning talent.

Anne Donarski: (07:40)
We are growing quite significantly as well. So we're adding more head count than we have in the past, but it's definitely with the pandemic. There's just a shortage of labor right now. And I know it's across the board. Everyone is feeling it. And I even feel it in my role. We're trying to hire an accountant and we've never had such low responses to a position posting. And we're even trying different ways to recruit people as well. We're trying virtual career fairs and campus recruiting and the traditional mining in LinkedIn. So we're trying all kinds of different things to get candidates in the door.

Stephanie Schomer: (08:14)
As the cost of education continues to rise and previous hopes of the Biden administration canceling any amount of student debt diminish this type of benefit may increasingly help employers appeal to new talent and build lasting loyalty too. It's all part of what Gregory Poulin co-founder and CEO of Goodly had envisioned when he first launched the startup back in 2018. But we'll get into that momentarily, after a short break.

Welcome back to Perk Up!, where we're talking about how student loan repayment benefit have become an increasingly attractive tool to help employers retain existing talent and attract new workers too. This was all part of Gregory Poulin original vision. When he launched goodly in 2018, though, his primary motivator was a bit simpler. He knew firsthand how debilitating student loan debt can be.

Courtesy of Goodly

Gregory Poulin: (09:00)
When I was in school, my father passed away unexpectedly after having a heart attack. So to pay for school at Dartmouth, I had to borrow $80,000 in student loans. And after graduation, I moved to Silicon valley to work at a startup I and my monthly student loan payment is now over $900 a month. So it's very challenging to live in a city like San Francisco when you're paying down such huge student loan debt, but also very challenging to do things like, say for retirement, or see to achieve some of your other financial goals with such large student loan payments.

Stephanie Schomer: (09:31)
That's Poulin, who at the time was working at an HR and pay role startup. But as he realized that his personal student loan challenge was more of a universal issue in one that employers were actually positioned to help with, he walked away from his gig and set out to launch Goodly turns out it was something plenty of employers were already craving. And the chance to simply modify the process with a platform like Goodly's was a welcome change.

Gregory Poulin: (09:54)
There were some companies that were looking for solutions to offer student loan benefits. Um, there were even some companies that were processing these types of payments and managing student loan benefits in house by manually cutting checks to each of their employees, student loan servicers and mailing them out. It was a very, of course, a labor intensive process that ate up a lot of their time. And so for those types of customers, we were able to move them onto our platform here at Goodly and leverage our software to automate offering student loan benefits. But there's also a big portion of companies in the United States that are still unaware that these types of benefits exist. One thing that helps support their employees that are struggling with student loan debt. And so one thing that we've done a lot of over the last few years is really create awareness for employers, by putting out different thought leadership and best practices for how companies can administer and implement these types of solutions.

Stephanie Schomer: (10:44)
And just as employer awareness of the benefit has grown in recent years, so has employee awareness that these benefits exist and that asking for them can be a pretty good bargaining chip.

Gregory Poulin: (10:54)
When we started the company in 2018, it would be very, very rare for an employer to reach out and say, you know, we have an employee who came to us asking about these types of solutions. Now we want to, to implement a solution. Now we've seen really that that really kind of take off in terms of the number of companies and the number of employers that are reaching out to our team here at Goodly and saying, you know, we lost a job candidate to one of our competitors because they're offering student loan benefit. Or during the interview process, we were being asked constantly, what does this organization provide in terms of being able to help employees who are carrying such high levels of student loan debt? You know, we need to be able to offer a solution. If we wanna remain competitive from a recruiting and retention perspective, many employers also credit student loan benefits with contributing to the diversification of their workforce and helping them to build a really diverse talent pipeline.

Gregory Poulin: (11:41)
The average black graduate holds about $25,000 more in student loan debt than white college graduates. Women hold about two thirds of all student loan debt, collectively holding about a trillion dollars in student loans and for Latino and Latinx borrowers, they typically have about 31% higher student loan debt. And the result is that underrepresented employee populations are starting their careers with larger debt to repay, which is delaying their ability to accumulate wealth compared to their majority group peers. And for companies that are realizing that their current benefits offerings are out of touch with a growing millennial and Gen Z workforce, they're increasingly turning to solutions like goodly and student loan repayment as an alternative solution to some of those benefits as well,

Stephanie Schomer: (12:24)
Poulin says, it takes just 10 minutes to get a company up and running on good lease platform. Employees are invited to join and all loan debt is verified on behalf of their employer. From there, the system manages all payments, which in the wake of COVID 19 and the cares act are tax free. Plus goodly processes, these payments in a way that can bring even more value to the benefit pull and explains.

Gregory Poulin: (12:45)
We process that payment as a secondary payment, meaning any contributions from the company we're going directly towards paying down the principal of the student loan. So for the average employee, by taking this approach, we can actually help them reduce their loan term by about 30% for a contribution of just a hundred dollars from the employer.

Stephanie Schomer: (13:03)
That's a vital part of this benefit design. And one that Donarski says was particularly important to Esker as they searched for a way to deliver this per to their staff. And one she'll continue to prioritize when Esker changed benefit partners in 2022, the intention is not to replace employees own payment toward their debt. The point is to use the employer's contribution as an additional payment toward the outstanding amount, which will help chip away at the loan total, getting that loan paid off faster and saving on compounding interest over the lifetime of the loan.

Anne Donarski: (13:32)
We are trying to encourage employees that this money should not replace what they're paying toward their student loan debt, but should be in addition to it so that we can eliminate their debt faster. And everyone that I have talked to about this benefit is, is just over the moon, ecstatic, that this is a benefit that we offer

Stephanie Schomer: (13:52)
Loans aside, the trickle down impact of this benefit can help reshape an employee's financial future. The pressure of student loan debt and that monthly due date can lead employees to focus on their bills at the expense of their retirement plan.

Anne Donarski: (14:04)
I'm a big fan of the 401(k). And we were shocked at how many people weren't fully capitalizing on the match that Esker offers. And part of our answer to that was, well, they have money going to other places, most likely student loan debt. So maybe if we can help them with their student loan debt, that they can start putting more money toward their 401(k) and saving for their future. Instead of paying off the debt from their past, and the student loan is a debt. It's a bill, you have to pay it. Whereas a 401(k), it's a debt to pay yourself, but you don't look at it that way. So, so many people don't consider paying themselves first.

Stephanie Schomer: (14:45)
Donarski is hoping to shift that trend and is putting it into practice with her own family. Her son is currently a sophomore in college and because one of his student loans was taken out in her name, she's able to embrace Esker's benefit to help him graduate with less debt.

Anne Donarksi: (14:58)
My son is very thankful for it because the more he gets from this, the less he has to the less chance he has of acquiring that student loan debt at the end of his college career.

Stephanie Schomer: (15:08)
And for Cook, well, the benefit is helping him build a brighter future — and bring a few more small pleasures to his day to day life.

Frank Cook: (15:15)
It's nice to know that they will be going away sooner and that it will be saving me more than just a contribution amount every month, but it will be saving me the additional interest and, and things like that because it's lowering the principle. So I think that's a definite benefit. It's the little things that it affords in life that you don't really realize, you know, it's the, it's the dinner out, it's the movies, it's the, you know, weekend road trip that, yeah, it's gonna be a tank of gas, which, you know, by today's prices could be 100 bucks for some people or 75 bucks, but you know, it, it's the additional kind of niceties out every month that I can attribute to that, which, which makes it a little bit, you know, it just makes the sunshine a little bit brighter,

Stephanie Schomer: (16:02)
A benefit that supports employee wellness in the present and future feels like a no brainer. And yet, as of 2020, just 8% of employers were offering a similar program, according to the Society for Human Resource Management. But as the war for talent persists, it's likely that this benefit will only gain speed and ideally make life a little easier for workers and their employers alike. I'm Stephanie Schomer with Employee Benefit News. Thanks for listening today.

Alyssa Place: (16:30)
And that's our show today. Thanks for joining us for the first season of Perk Up! and be sure to revisit all six episodes wherever you get your podcasts. This episode was produced by Employee Benefit News with audio production by Kellie Malone. Special thanks this week to Frank Cook and Anne Donarski from Esker and Greg Poulin from Goodly. Rate us and review us and check out more from the team at benefitnews.com.