Companies that hire swaths of college grads — a group that tends to have a lot of debt — are at the forefront of the trend. They hope student-loan assistance will help attract and retain the best workers.
Gabi Gutierrez, like the typical college graduate who took out loans, graduated from Virginia Tech this year with around $30,000 in student debt. Unlike most of her peers, Gutierrez, an associate in forensic services at PricewaterhouseCoopers, will have help paying off those loans from her employer.
Starting in July, PwC will put $100 a month toward her $250 burden, a contribution that could total $7,200 over time. PwC is one of a handful of companies offering to pay part of their employees’ student debts.
Natixis, an asset-management firm, announced its own student-loan repayment program Dec. 8. The company plans to contribute up to $10,000 toward student loans and is making the perk available to any of the company’s 525 U.S.-based employees that have been with the company for at least five years.
Natixis will pay the benefit in lump sums: $5,000 after five years of working at the firm, followed by annual $1,000 payments over the succeeding five years.
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Student-loan payment programs are still rare. Only 3 percent of more than 450 surveyed companies offer such programs as a part of their benefit plans, according to the Society for Human Resource Management’s 2015 Employee Benefit Survey. Some predict companies will soon catch on in a big way.
“Those numbers are understated because there is a lot of pent-up demand for this stuff,” said Bruce Elliott, the society’s manager of compensation and benefits. This was also the first year the society included the benefit on its survey. “I do think it’s the beginning of a trend,” he said.
Companies that hire swaths of college grads — a group that tends to have a lot of debt — are at the forefront of the trend. PwC, for example, plans to hire more than 11,000 through campus recruiting this year.
Most employers tend to put from $100 to $250 a month toward an employee’s debts while capping the amount they’ll contribute, said Tim DeMello, founder and chief executive of Gradifi, a platform that helps employers such as PwC contribute to employee student-loan payments.
An employer’s contribution probably won’t cover its workers’ entire debt load, but it can make a meaningful dent. Some companies offer refinancing reductions, a slightly different, related benefit. “We’re seeing that it always comes down to meaningful contribution,” said DeMello.
Gradifi has signed up nearly 100 employers, including PwC and some other “high profile” clients, DeMello said.
The company will start rolling out payments at the beginning of next year.
“Anything helps when it comes to paying off a loan,” said Gutierrez, 23, who is saving money to move out of her parents’ home in Northern Virginia. “One hundred dollars a month is a great help to me.”
As with many benefits, employers hope student-loan assistance will help attract and retain the best workers.
“We’re a very innovative company; we rely on innovation to move us forward,” said Ed Farrington, executive vice president of business development and retirement at Natixis. “We have to attract the best and brightest.”
As the economy has improved, employee retention and turnover is one of the biggest issues facing employers. Employers have offered an array of strategic perks, including generous paternity leave, to battle attrition.
“Employers aren’t doing this to be nice,” said Elliot. “They’re doing this as an investment — and to differentiate themselves so they can continue to pull from the top of the talent pool.”
There’s another advantage to piling on benefits as a recruitment tool. If the economy sours, it’s much easier to cut a benefit than a salary; employees don’t feel the sting as much.
Like many trendy benefits, this perk will help only a small, elite portion of the workforce. Over the next three years, however, Elliot predicts that debt repayment, on some level, will become as common as health benefits.
“$1.3 trillion is a big number.” said Gradifi’s DeMello, referring to the national student-debt balance. “These types of initiatives are going to really help.”