Student loan repayment: the newest workplace perk for Millennials
January 4, 2016
By Kristin Cifolelli, courtesy of SBAM Approved Partner ASE
From game rooms to all-day snacks to on-site massages and cleaning services, there is really no end to the perks employers have come up with in their efforts to attract top-level talent and become known as employers of choice. One of the newest trends in workplace perks that is starting to gain attention is specifically aimed millennials – student loan repayment programs.
As college costs have skyrocketed, many millennials graduate with staggering amounts of student loan debt. In a 2015 survey by Bankrate.com, 56% of millenials indicated they are putting off major life decisions because of their student debt. Twenty-nine percent of the 18-29 year olds have put off buying cars, 19% have put off marriage and 30% have put off buying homes.
According to Mark Kantrowitz, publisher at Edvisors, a group of websites devoted to planning and paying for college, the typical graduate of the class of 2015 with student-loan debt owes about $35,000 on average. Even adjusted for inflation, that amount is still more than twice as much as borrowers owed just 20 years ago. Total education debt, including both federal government and private loans, totals close to $68 billion this year for graduates with Bachelor’s degrees.
In response this financial challenge faced by so many in the younger generation, companies such as online bookseller Chegg.com and the private lending startup CommonBond, have recently implemented student debt assistance programs to attract top talent. The accounting firm Pricewaterhouse Coopers has announced it will roll out such a program in July 2016 and the global asset management firm Natixis will be its program in January 2016.
According to Tom Codd, the PwC’s Human Capital Leader for the U.S., “student loan debt, driven by the rising cost of higher education, is a pain point for recent graduates. As a firm that recruits more than 11,000 new hires off campus each year, this is an opportunity to differentiate ourselves with a key talent group – millennials – and provide a meaningful way to help reduce their debt.”
Here are some of the companies that are in the process of developing, or have recently implemented, student loan repayment programs:
- Pricewaterhouse Coopers offers full-time employees who hold associate or senior associate titles $1,200 per year for up to six years. The benefit is capped at $7,200 and is treated as taxable income. Approximately 45% of their 46,000 employee base would be eligible. PwC uses a platform created by a company called Gradifi to help administer the program. The firm contributes directly to the employee’s student loan principal on a monthly basis and Gradifi distributes the funds to student loan servicers. The program will start in July 2016.
- Natixis offers employees who have worked for the company for at least five years up to $10,000 over six years. Half ($5,000) is payable up front and then the employee receives $1,000 each consecutive year until he or she reaches the $10,000 cap. Natixis issues the benefit similar to a regular paycheck and employees are expected to apply the money to outstanding student loans. The benefit is treated as taxable income. The program begins January 2016.
- CommonBond offers any employee with student loan debt $100 per month indefinitely. The benefit will continue until the loan is fully paid off and the employee continues to be employed by CommonBond. This program is different from PwC and from Natixis in that it has no cap. The benefit is treated as taxable income. The program started in December 2015.
- Chegg makes full-time employees with student debt eligible for $1,000 per year indefinitely. Chegg works with a student loan payment site call Tuition.io to help administer its program. Employees set up a profile and Chegg sends the benefit directly to Tuition.io. From there, the funds are sent to the student loan servicers. The benefit is treated as taxable income. The program began in April 2015.
Student loan repayment programs as an employee benefit are very much in their nascent stage—only about 3% of employers are estimated to currently offer them. This means that employers who do offer them are clearly differentiating themselves from other employers in the ongoing war for millennial-generation talent.