Almost everyone agrees that ever-rising student debt totals ($1.3 trillion and counting) are a problem. What we can’t seem to agree on is what to do about it. Some want to make it easier to discharge student loans in bankruptcy. One startup has combined crowdfunding with online gaming to help people pay off debt faster. Now, there’s another idea on the horizon: Student loan repayment as a job perk.
Accounting and professional services giant PricewaterhouseCoopers has rolled out just such a benefit. All of its associates and senior associates are now eligible to receive up to $1,200 a year to pay back their student loans. Boston-based startup Gradifi will administer the program, and it predicts that PwC will be the first of many companies to introduct a student loan payment program for employees.
“We expect to see a number of organizations following in PwC’s footsteps by adding this type of incentive to their benefits package,” Tim DeMello, founder and CEO of Gradifi, told The Cheat Sheet. Employers have shown “tremendous interest” in the student loan payment plan, DeMello said, and Gradifi is working on developing similar programs for businesses with as few as five employees and as many as 40,000.
“Companies are starting to see how they can turn this national issue into an opportunity; not only does this benefit help a company attract and retain talent, it also helps differentiate them from competitors,” DeMello said. Younger, debt-burdened workers may eventually start seeking out employers who offer the benefit, he added.
PwC is hoping that its new benefit will catch the attention of graduates weighing offers from competing firms. The company predicts that the program could cut principal and interest payments on an individual’s student loans by up to $10,000 and shrink payoff periods by up to three years.
“Student loan debt – driven by the rising cost of higher education – is a pain point for recent graduates,” Tom Codd, vice chairman, US Human Capital Leader, PwC, said. “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.”
Addressing the financial needs of struggling millennial employees was the impetus for Natixis Global Asset Management’s new student loan payment plan. In December 2015, the financial firm announced that it would give employees $5,000 toward their loans after their five-year employment anniversary and another $1,000 a year for five years thereafter.
“In addition to hearing firsthand from our younger employees about the toll student debt can take on other financial obligations – such as saving for retirement – our extensive research on Americans’ financial health supports the need to provide student loan repayment as a benefit,” John Hailer, Natixis’s president and chief executive officer in the Americas and Asia, said.
The idea of employers paying off a workers student loan debt isn’t an entirely new one. Currently, 3% of companies offer such a benefit, according to the Society for Human Resource Management (SHRM). Nurses, doctors, and teachers are among those most likely to receive the perk, Bruce Elliott, manager of compensation and benefits for SHRM, told the Washington Post. Americorps volunteers also receive money that can be used to pay off student debt when they complete their term of service.
In addition to PwC and Natixis, CommonBond, a financial tech firm, and Chegg, an education company, also offer student loan repayment as an employee benefit. Fidelity Investments and Massachusetts Mutual Life Insurance Company are among those considering adding the perk.
“It’s only going to grow in popularity,” Andrew Josuweit, CEO and president of Student Loan Hero, a student-loan management site, told CNBC. “Millennials don’t care about 401(k)s and realistically they shouldn’t … Our advice is, let’s kill your student loans as fast as possible, then focus on building a retirement account.”