Com­pa­nies: Yes, We Care about

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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.

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