New work­place perk helps em­ploy­ees pay stu­dent debt

But few pri­vate-sec­tor jobs of­fer loan as­sis­tance ben­e­fits

Baltimore Sun - - FRONT PAGE - By Lor­raine Mirabella

As an un­der­grad­u­ate at Bryant Uni­ver­sity in Rhode Is­land, Paul Tay­lor II stud­ied ac­count­ing and played foot­ball on a schol­ar­ship. The Bal­ti­more na­tive also worked on and off cam­pus, know­ing he’d need to save money to start chip­ping away at a mas­sive stu­dent loan.

Af­ter Tay­lor com­pleted a mas­ter’s pro- gram, also at Bryant, he started full time at Price­wa­ter­house­Coop­ers in Bal­ti­more in June. To his sur­prise, he found the job came with an un­ex­pected but much-needed perk: stu­dent loan as­sis­tance.

“I know it’s go­ing to be a big part of my spend­ing and how I plan my life for the next decade or more,” said Tay­lor, 22, of the $400 monthly pay­ment he ex­pects to owe on about $40,000 in loans. “Any of­fer to help pay down loans is a great place to be.”

With re­cent col­lege grad­u­ates like Tay­lor start­ing their ca­reers with debt loads av­er­ag­ing $30,000, some work­places are

try­ing to ease work­ers’ fi­nan­cial bur­dens — and dis­tin­guish them­selves as they vie to at­tract and re­tain top tal­ent — by of­fer­ing loan con­tri­bu­tion ben­e­fits along­side health and re­tire­ment plans.

“Em­ploy­ers more and more are start­ing to un­der­stand the role they can play in build­ing the fi­nan­cial well­ness of an em­ployee,” by help­ing pay down stu­dent debt, said Catesby Per­rin, head of busi­ness de­vel­op­ment for SoFi, a San Fran­cis­cobased lender that says it pi­o­neered stu­dent loan re­fi­nanc­ing and now helps em­ploy­ers of­fer loan con­tri­bu­tion ben­e­fits as well.

“Re­tire­ment and health care … have been the two legs of the most com­mon em­ployer ben­e­fits,” Per­rin said. “That doesn’t re­ally re­flect to­day’s eco­nomic re­al­ity for the larger part of the work­force. Stu­dent debt has ex­ploded into a cri­sis.”

Stu­dent loan debt — es­ti­mated at nearly $1.3 tril­lion in the United States — has sur­passed credit cards to be­come the sec­ond-largest cat­e­gory of house­hold debt af­ter home loans.

Still, rel­a­tively few pri­vate-sec­tor em­ploy­ers of­fer loan as­sis­tance ben­e­fits.

Just 3 per­cent of em­ploy­ers sur­veyed last year by the So­ci­ety of Hu­man Re­sources said they of­fered the ben­e­fit, the first time it asked the ques­tion. That edged up to 4 per­cent this year, and the trade group said a grow­ing num­ber of em­ploy­ers plan to of­fer the ben­e­fit in the fu­ture while more are think­ing about pro­vid­ing it.

The group is ad­vo­cat­ing for a change in the fed­eral tax code to pro­vide tax re­lief to em­ploy­ers that of­fer loan re­pay­ment help. Fed­eral leg­is­la­tion has been pro­posed that would make con­tri­bu­tions tax-free for work­ers.

Debt loads have risen along with tu­ition costs. Over the last three decades, the av­er­age cost of tu­ition, fees, room and board for all four-year in­sti­tu­tions jumped nearly five­fold to $25,409 as of 2014-2015, ac­cord­ing to the Na­tional Cen­ter for Ed­u­ca­tion Statis­tics. When ad­justed for con­stant 2014-2015 dol­lars, costs more than dou­bled.

Ex­perts dis­agree about what’s driv­ing the in­crease, blam­ing re­duc­tions in state sup­port for pub­lic col­leges, ris­ing spend­ing by col­leges and the in­creased avail­abil­ity of fed­eral stu­dent aid, among other fac­tors.

Mil­len­nial em­ploy­ees, who last year sur­passed Gen­er­a­tion X work­ers to make up the largest share of the U.S. work­force, are in worse fi­nan­cial shape than their older col­leagues, ac­cord­ing to a 2016 em­ployee fi­nan­cial well­ness sur­vey con­ducted by Price­wa­ter­house­Coop­ers.

More than three-quar­ters of mil­len­nial work­ers sur­veyed said their stu­dent loans have a mod­er­ate or sig­nif­i­cant im­pact on their abil­ity to meet other fi­nan­cial goals. Sixty-five per­cent of work­ers of all ages with stu­dent loans found it dif­fi­cult to pay for house­hold ex­penses on time, com­pared with 35 per­cent of all other em­ploy­ees. Half of those with stu­dent loans said fi­nances have been a dis­trac­tion at work, com­pared with 23 per­cent of all other em­ploy­ees.

While rel­a­tively new in the pri­vate sec­tor, stu­dent loan ben­e­fits have long been of­fered by fed­eral agen­cies. In 2014, 33 agen­cies pro­vided more than 8,400 em­ploy­ees with more than $58.7 mil­lion in re­pay­ment ben­e­fits, a 15 per­cent in­crease in the num­ber of em­ploy­ees over 2013, ac­cord­ing to a re­port by the fed­eral Of­fice of Per­son­nel Man­age­ment.

Most of those get­ting ben­e­fits worked for de­part­ments of De­fense, Jus­tice, State and Vet­er­ans Af­fairs, as well as the Se­cu­ri­ties and Ex­change Com­mis­sion. Plans vary by agency. The Pen­tagon of­fers plans as in­cen­tives for en­gi­neers and nurses, call­ing it a sig­nif­i­cant re­cruit­ment tool, ac­cord­ing to the re­port.

“One of the most im­por­tant pri­or­i­ties for Fed­eral agen­cies is at­tract­ing and re­tain­ing well- qual­i­fied, high-per­form­ing em­ploy­ees,” the re­port con­cluded. “Stu­dent loan re­pay­ments are a valu­able hu­man re­sources tool that en­ables agen­cies to re­cruit highly qual­i­fied can­di­dates into Fed­eral ser­vice and keep tal­ented em- ploy­ees in the Fed­eral work­force.”

SoFi has been work­ing with em­ploy­ers for about three years to of­fer stu­dent loan re­fi­nanc­ing as a ben­e­fit. About six months ago, the com­pany set up a new pro­gram al­low­ing busi­nesses to con­trib­ute to­ward stu­dent loans much as they do with 401(k) ac­counts. About 20 em­ploy­ers have signed on, and Per­rin said he ex­pects that num­ber to at least dou­ble by 2017.

“We’re see­ing more and more step up to the plate and in­vest in their em­ploy­ees by con­tribut­ing funds,” said Per­rin, adding that it’s a log­i­cal next step as em­ploy­ers roll out new well­ness ben­e­fits. “Stu­dent loans have be­come such a huge is­sue” for the mil­len­nial gen­er­a­tion.

Per­rin said con­tri­bu­tions go di­rectly to the loan ser­vicer and run the gamut from $50 a month to as much as $50,000 a year that one em­ployer of physi­cians con­trib­utes. SoFi of­fers $200 a month to its own em­ploy­ees. About $100 a month is typ­i­cal, he said.

Kronos Inc., a Bos­ton-area de­vel­oper of work­force man­age­ment soft­ware for com­pa­nies such as Ap­ple, Mar­riott and Nes­tle, prides it­self on be­ing a sought-af­ter work­place. Debt from stu­dent loans “was one of a few pain points we saw with our em­ploy­ees, not just younger ones, but em­ploy­ees in their 30s and 40s, who are drown­ing in this debt,” said David Almeda, the com­pany’s chief peo­ple of­fi­cer. “For some­one who’s just start­ing out, that’s a big bur­den. We rolled out a bunch of new ben­e­fits last year and wanted to en­sure we could of­fer some kind of re­lief.”

When Kronos of­fered the ben­e­fit in the spring, more than 200 peo­ple signed up in the first 48 hours. The firm con­trib­utes $500 a year, spread over 12 months, to­ward loan prin­ci­pal through a di­rect pay­roll con­tri­bu­tion. Three hun­dred peo­ple are now en­rolled, and the com­pany ex­pects that num­ber to grow to 1,000. All full-time work­ers are el­i­gi­ble, no mat­ter how long they have worked for the com­pany.

The cost to the com­pany — an es­ti­mated $500,000 an­nu­ally — is worth it, Almeda said.

“It just con­veys the right mes­sage to peo­ple, that this is a part­ner­ship and we care about you,” he said. “It helps us on a prac­ti­cal level from an at­trac­tion per­spec­tive. It dif­fer­en­ti­ates us.”

In Price­wa­ter­house­Cooper’s stu­dent loan pay­back pro­gram, which started July 1, as­so­ci­ates and se­nior as­so­ci­ates re­ceive $1,200 a year to­ward stu­dent loans for up to six years — or up to $7,200. The firm sees it as an en­tice­ment for the 11,000 work­ers hired off cam­puses as in­terns and in per­ma­nent jobs each year. The com­pany signed up 8,000 of its per­ma­nent work­ers as of Oc­to­ber.

Stu­dent debt “is a big prob­lem for our so­ci­ety,” said Rod Adams, who leads U.S. re­cruit­ing for Price­wa­ter­house­Coop­ers. “We’re hir­ing 11,000 new grads into the firm a year. This helps take one of the things they’re stressed about off their plate. It frees them up to hit the ground run­ning and be more pro­duc­tive.”

Tay­lor, who grew up in West Bal­ti­more and grad­u­ated from Bal­ti­more Polytech­nic In­sti­tute, got a brief re­prieve from pay­ments on stu­dent debt while in grad­u­ate school. But he amassed yet more debt while there. And he watched re­cently grad­u­ated friends strug­gle to start mak­ing stu­dent loan pay­ments. Many made it work by mov­ing back in with their par­ents. He has done the same to try to save money.

“It’s in­ter­est­ing how much it takes out of your pocket,” Tay­lor said. “It’s a big deal, es­pe­cially to peo­ple in my gen­er­a­tion grad­u­at­ing now with large debt com­ing out of col­lege.”

Tay­lor, who han­dles au­dits for busi­ness clients at Price­wa­ter­house­Coop­ers, gets an email each month alert­ing him that his em­ployer has made a pay­ment to his loan ser­vicer.

“It shows your em­ployer hon­ors your work and wants you to stick around,” he said, “and un­der­stands what you’re go­ing through.”

“Stu­dent loans have be­come such a huge is­sue” for the mil­len­nial gen­er­a­tion.

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