As a new crop of workers matriculates into the workforce — many of whom are bringing their sizable student loan debt along with them — an increasing number of employers are offering a life raft.
Student loan debt repayment programs is a benefit that’s on the rise and is expected to be more prevalent in the future, according to a Willis Towers Watson survey. As of 2018, 4% of employers were contributing to student loans. However, 32% of employers surveyed plan to make contributions to their employees’ student loans by 2021. Likewise, employers offering student loan consolidation is expected to jump from 8% to 34% over the same timeframe.
Similar to Willis Towers Watson’s research, WorldatWork’s “2018 Total Rewards Inventory Program and Practices” survey found that the benefit was still uncommon a year ago, as 6% of employers surveyed offered a student loan debt repayment program, which was up only slightly from 4% in 2017.
It’s a benefit that many college graduates crave when determining what organization to start their career with, according to an Abbott Laboratories survey. Abbott’s research found that 90% of college students are on the hunt for a company with a student loan perk and 62% of currently employed adults with student loans would consider switching companies to gain a student loan relief benefit.
“I would say that a student loan program is an amazing tool for attraction,” said Lydia Jilek, senior director of voluntary benefits at Willis Towers Watson.
Abbott, of course, instituted its Freedom 2 Save Program in 2018, which allows employees to pay off student loans while still obtaining a typical 401(k) match. The program dictates that if an Abbott employee puts at least 2% of pay toward student loans, the company will put 5% of their pay into a 401(k) account.
“Abbott’s plan sort of took the blinders off employers that were otherwise focused on the traditional models that the vendors had established,” Jilek said. “This created sort of a new era that we have seen within the last 10 months, where we’re seeing a lot more of our clients come to us with [interest in Abbott’s plan]. What that has done is its shown employers that they don’t have to follow specifically what the vendors in the space have established as parameters.”
To Jilek’s point, many employers and industry groups have pushed for legislation that provides comprehensive guidance on how employers can and should structure student loan repayment benefits under their retirement plans, according to the National Law Review. The Retirement Parity for Student Loans Act, if enacted, would do just that.
However, while there are many benefits to creating a student loan debt repayment program, employers shouldn’t rush to implement one just because it’s currently in vogue.
“A program like this is a personal decision for an organization. It depends on your demographics, how your employees are feeling, what your industry is, what your financial well-being profile is,” said Peter Debellis, total rewards research leader at Deloitte, at WorldatWork’s Total Rewards Conference in May. “It’s not something to do lightly. It can have some serious financial ramifications, so it’s something to step in thoughtfully if you are thinking about going down this road.”
Plenty of employers, big and small, are taking the initial steps down this road. Walmart Inc. became the biggest name to join the list, as the nation’s largest private employer said Tuesday it will offer debt-free college benefits to high schoolers to attract and retain workers. More private employers are likely to follow with their own creative take on the benefit offering, but it could be a few years before it’s widespread, Jilek said.
“What I think we’re going to see is we’re not going to get to those significant levels by 2021, but we’re going to see continued movement in that direction,” Jilek said. “There are probably other employers out there that are looking at doing private letter rulings of their own to continue the progression of these types of models. I think we’re going to continue to see an expansion of employers helping employees with their student loan debt. However, I don’t think we’re going to exclusively see the traditional models.”
STUDENT LOAN DEBT ROUNDUP
Tossing a Lifeline
Trisha L. Howard provided an in-depth look at the state of student loan debt repayment programs in this feature for the April edition of Workspan magazine. Howard’s piece revealed that a small, but growing number of organizations are adding student loan assistance programs, saying it helps attract and retain younger workers.
Luring Young Workers
Companies have a new pitch to lure top Millennial talent and that’s offering to pay down a portion of employees’ student debt, writes Donna Fuscaldo in this piece for Forbes. Fuscaldo explains how this emerging benefit is becoming more attractive to employers, as it can help give them a leg up on the competition in a tight labor market.
A proposed tax incentive for businesses could bring relief for more than 44 million Americans saddled with student debt, writes CBS News. The idea, which has bipartisan support, is to allow companies to give tax-free assistance to employees to pay off student loans. But it might be a little longer before it’s approved.
PricewaterhouseCoopers (PwC) has paid nearly $26 million toward eliminating employees’ student loan debt since launching its repayment benefit in 2016, reports Caroline Hroncich of Employee Benefit News. Hroncich points out that PwC, an accounting and consulting firm, was one of the first employers to tackle student debt by adding a pay-down program for employees.
There are many reasons to accept a job, but more and more Millennials and Gen Z workers are searching for employers that offer student loan repayment assistance programs, writes Megan Leonhardt of CNBC. Leonhardt features a recent graduate who had $60,000 in loans and opted to join Abbott, a health-care company that recently rolled out an innovative student loan debt assistance program.
About the Author
Brett Christie is a staff writer at WorldatWork.