The way to workers’ hearts is often through their wallets, but many existing benefits programs fall short of the mark. After all, younger workers aren’t necessarily impressed with retirement plans that won’t benefit them for decades to come. This is especially true if they’re saddled with thousands of dollars in student loan debt.
Recognizing the benefits disconnect for younger employees burdened by such loans, some companies are stepping up to the plate to assist in the pay-down process. Heavy-hitters such as PwC, Natixis and Chegg have rolled out student loan debt assistance programs meant to help longer-term, loyal employees ease some of their immediate financial burdens.
Student loan payoff programs are not necessarily new; some colleges and government agencies have offered them for years. Known as Loan Repayment Assistance Plans (LRAPs), these benefits have been held primarily by those working at certain colleges or in the government sector. In many cases, LRAPs have been reserved for employees with costly degrees, such as those in STEM fields, law or medicine.
Natixis, PwC and others are playing off the LRAP idea to offer tangible, important benefits to all workers saddled with student loan debt. As Millennials have officially overtaken Generation X as the largest generation in the workforce, more employees find themselves carrying the heavy baggage of student loans. For employees coming straight out of college, the benefit can be a big attractor. Student loan debt recently reached an all-time high of $1.2 trillion.
With only an estimated 3% of companies offering repayment assistance so far, firms that add this benefit are writing the rules for themselves, many using the carrot as a way to foster retention.
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Online bookseller Chegg.com launched its program in April 2015. It offers $1,000 a year in student loan repayment assistance for as long as a person works at the company. The benefit is available to any full-time employee with outstanding debt. To streamline the process, Chegg partners with Tuition.io to send payments directly to an employee’s loan servicer. The benefits, however, are taxable.
Natixis, a Boston-based global asset management firm, intends to start its program on Jan. 1, 2016. This company is using the benefit as a tool to retain long-term employees. The new benefit will pay $10,000 over six years with $5,000 up front and $1,000 each year until the threshold is hit. The caveat here is employees have to be with the company for at least five years to be eligible. Rather than pay loan servicers directly, Natixis intends to pay out the perk like a regular paycheck. The benefit is taxable.
Natixis’ decision to roll out the new benefit was prompted by its realization that many people were putting off retirement savings because of student loan debt. In its 2015 Retirement Plan Participant Study, the company found that nearly 23% of Americans and more than one-third (35%) of Millennials do not contribute to company-sponsored retirement plans because of a desire to prioritize student loan payments.
Whether student loan assistance programs will promote earlier retirement savings, as Natixis hopes, remains unclear. The trend in providing this benefit is growing though, which means time will soon tell.