Education assistance and student-loan repayment benefits may just be the hot benefit to watch—as a growing number of employers have recently announced they will be offering the perk, and many more say they’re thinking hard about providing it.
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By the numbers, the benefit is still relatively rare. Four percent of organizations offer student loan repayment, according to the Society for Human Resource Management’s (SHRM) 2016 Employee Benefits Survey report of 3,490 HR professionals. That’s up just one percent from a year ago.
But observers say change is coming, especially as more companies offer workers other benefits tied to student loans, which then often serve as a stepping stone to expanded financial contributions.
For example, a late 2015 Willis Towers Watson survey also found that 4 percent of employers currently have a student loan repayment program. By 2018, however, the global advisory consulting firm found that number is projected to grow to nearly 20 percent, says Randall Abbott, senior strategist and a North American leader in the health and benefits practice.
In fact, given that employer interest has blossomed so widely since then, Abbott says it’s quite possible that the projected rise could accelerate even faster.
Employer Interest on the Upswing
Consider these recent declarations:
- Office-supply giant Staples will provide $100 a month for up to 36 months to full-time sales associates, “high potential” and “top performing” employees who are paying off student loans or in the process of earning a degree.
- Publishing company Penguin Random House will contribute $1,200 a year to employees’ student debt—up to a cap of $9,000.
- Fidelity Investments’ “Step Ahead” student loan assistance program provides employees with more than 6 months of tenure $2,000 a year towards their student loans, up to a cap of $10,000.
- PricewaterhouseCoopers (PwC) will offer $1,200 a year as part of its student loan paydown plan for its associates and senior associates.
- Boston-based financial services firm Natixis Global Asset Management will contribute up to $10,000 to every full-time employee who has outstanding federal Stafford or Perkins student loans—made up of one $5,000 cash payment to employees after 5 years at the company, followed by annual payments of $1,000 over the next 5 years.
Driving the Fin-Ed Trend
What’s fueling the rise in the number of employers adding the benefit? Statistics show that 71 percent of graduates are typically entering the workforce with significant education debt.
In fact, the typical student debt load is disturbingly high. Graduates today carry an average of $28,100 in debt along with their diplomas, according to Trends in Student Aid 2016, The College Board’s annual tracking of college financial aid and payment trends, which collects data from bachelor’s degree recipients from public and private institutions who borrowed.
Fidelity, for example, estimates about 25 percent of its employees are encumbered by student loans. In the first few weeks of offering its new student loan assistance program, nearly 5,000 employees enrolled and began receiving student loan payments, says Jennifer Hanson, head of associate experience and benefits.
Surveys also reveal that younger workers don’t feel able to fully take advantage of a company’s retirement benefits because of the hefty burden of their monthly student loan bills. In fact, 49 percent of 1,000 Americans with student loans said they’d prefer help with paying their student loans over other benefits—including retirement plans, according to a 2016 survey by Watertown, MA-based EdAssist.
Employers are hearing the same concern. In its own study of retirement-plan participants, Natixis Global found that 35 percent of Millennials said they don’t contribute to a company-sponsored retirement plan because they need to pay off student loans.
Not surprisingly, this tough tradeoff causes stress. More than 90 percent of managers polled last fall by education-fintech company IonTuition said student loan debt creates stress for employees, and 80 percent blame the financial stress for decreases in employee productivity.
In Monday’s Advisor, we take a look at design decisions inherent in implementing a student loan assistance program within an overall financial-benefits lineup.