Companies: Yes, We Care about
Companies: Yes, We Care about America’s $1 Trillion Student-loan Debt Problem
Facebook offers laundry services, Airbnb gives employees a yearly $2,000 bonus to travel the world, Google offers massage credits, and Evernote offers twice-a-month house cleaning services. For Millennials, these are some very Silicon Valley-esque perks. But, do they really want it? Employers are starting to offer some very practical solutions to the gravest of all Millennial-problems: paying off student-loan debts.
In June this year, the accounting firm Pricewaterhouse Coopers announced that the company will help associate-level employees (who make up 45 percent of Pwc’s 46,000 U.S. employees) with their student-loan debt. PWC will contribute about $100 a month towards an employee’s student-loan principle for up to six year, for a total payout of $7,200. Since paying off loan principle will reduce interest, the company estimates that the benefit is worth up to $10,000.
“Student loan debt-driven by the rising cost of higher education-is a pain point for recent graduates,” said Tom Codd, the U.S. Human Capital Leader for PWC, in a press release. “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.”
A Boston start-up called Gradifi worked with PWC to create the program. Tim Demello, Gradifi’s founder and CEO, said that PWC is the platform’s first client but that the firm has signed on another 100 companies that are keen on figuring out how to offer student-loan relief as a perk for their employees. The move not just keeps companies competitive in recruiting talent, it additionally sends a message that they care about America’s $1 trillion student-debt problem.
A lot of companies have as of late announced studentloan perk programs. Natixis Global Asset Management is offering federal student-loan repayment to employees who have been with the company for at least five years up to $10,000. Fidelity Investments is also expected to launch an employee student-loan repayment pack by the end of 2017.
From a psychological viewpoint, student-loan relief can be stress reducing. If more companies open up to offering such perks, it may become a real relief for the Millennial generation which is already struggling to pay off student-debts. The only snag here is that the money to replay student-loan debts is taxable.
There are a few more considerations too. According to Mark Kantrowitz, publisher of Cappex.com, student-loans repayment perk does not essentially equate to getting paid more. Some companies cap the amount of debt relief, which means the extra money will eventually run out, and you don’t have a higher salary.
In a September study from Iontuition, a site that helps manage student-loan repayments, more than fifty percent of current students and recent graduates with student-loan debts said they would preferably get an offer of loan help than a healthcare plan. About half of the students surveyed additionally said they would preferably have student-loan help than a 401(k).
Companies that offer student-loan help, do as such on top of a 401(k) and medical insurance. In any case, if employees don’t get these perks along with the loan repayment, they may be better off with rather tax-exempt perks.
The faster a company offers to pay off the loan, the better the perk. This is because keeps the interest from accruing on the loan, which eventually makes it cost more.
For the time being, relatively few employees need to consider such things. Around 3% of firms in 2015 offered to help their employees pay off their student loans, as per a study from the Society for Human Resource Management.
Yet, the general public sees signs that this perk could turn out to be more common. For one thing, Millennials now represent the biggest demographic in the workforce and are more likely to begin demanding the perks. With the job market recouping, millennials will have more influence when evaluating job offers. This might as well be the start of a new trend.
Student Loan Genius, a company that helps its clients deal with their student loan benefits, announced a new option in August 2016 that may help to alleviate employees’ tax concerns. With this added component, organizations can make a contribution to an employee’s retirement account pretax that is triggered by an employee’s student-loan payment.
In the meantime, employers and employees are looking to Washington for help on this issue.
Sen. Mark Warner (D., Va.) presented a bill in Congress in January that would permit companies to put as much as $5,500 a year pretax toward their employees’ student loans. Unlike other legislative proposals for the student-debt crisis, including allowing borrowers to renegotiate their loans at lower interest rates through the government and making two years of junior college free-the bill has support from a few Republicans.