For many Millennials, a company that offers to pay down a portion of their student loans sounds like a dream. But, these types of benefits are set to become a reality and commonplace at many large companies next year.
“Companies are looking to tailor benefits to their employee population,” said David Melancon, founder and CEO of New York-based btr., a benchmarking platform that ranks companies. “They are trying to get Millennials and even the folks after Millennials to choose their company.”
Offering a contribution to a graduate’s student loans is a recruitment and retention tool, student loan industry experts say. It’s similar to a sign-on bonus or a bump up in salary compensation.
Tax and consulting firm PriceWaterhouseCoopers, a Fortune 500 company that employs over 45,000 employees in the U.S., announced last month that it would offer this new style of benefit to its eligible employees.
“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,” said Tom Codd, vice chairman and U.S. human capital leader at PwC, in the company’s press statement.
Millennials want more benefits from their employers and say the burden of paying down student loan debt is a high priority. A recent study by Ed Assist, a tuition assistance management service for employers, found that 33% of Millennials expect employers to assist in paying down some of their student debt.
Some 71% of students attending four-year college borrow money to pay for their education, according to the Institute for College Access & Success. The average graduate completes school with around $35,000 in student debt.
The average employee age at PwC is 28-years-old, a pivotal factor in the company’s decision to offer the benefit to attract Millennial talent, said Tim DeMello, founder and CEO of Gradify, a Boston-based start-up that offers student loan plan (SLP) repayment benefit programs to employers.
Under the program managed through Gradify, PwC will contribute $1,200 a year to its employees who have one to six years of work experience, reducing the principal of those student loans.
DeMello says that between 20% and 30% of Fortune 500 companies have already signed up for Gradify's SLP program. Many of the companies signing up are large employers in the technology and finance sector, but the list of enrollees includes other businesses such as law firms and advertising agencies.
”Silicon Valley is big for us," DeMello said. "But, we also have a small company in Oklahoma that has 76 employees that is a young group that wants to do the program."
Many of the companies signed up plan to roll out their tailored version of the benefit, contributing $100 or $200 a month to an employee’s student debt, starting on July 1 or September 1 next year.
Progressive companies are building trust, offering unique benefits to recruit a creative class of employees, said btr.’s CEO. “They'll all competing for a similar pool of people – at least in their younger recruits,” Melancon said.
Unlike a 401(), there are no tax benefits for an employer to offer this type of product, said Stephen Dash, founder and CEO of Credible, an online marketplace for financing or refinancing student loans. “Employers are saying they know this is a big issue,” he adds.
But, employers are expected to save money in the long run by offering student debt contribution to their workers, since it reduces turnover costs and increases employee retention, industry experts say.
”You're seeing a lot more lifestyle benefits," said Melancon. “The evolving nature of benefits that we give employees beyond salary and office space is a very hot ground, and you're going to see more companies stepping out and doing interesting things."