In the past, a benefit prospective employees were most anxious to hear about were the terms of their company-sponsored retirement programs. How much does the firm contribute? Where are those funds allocated? When do I become vested?
Now a variation on the employee benefit theme has surfaced in the form of student loan pay-off programs. PricewatershouseCoopers, one of the Big Four U.S. consultancies, rolled its out in September. Natixis Global Asset Management and mutual fund company Fidelity Investments each introduced one on December 8.
”At PwC, we hire roughly 11,000 people off campuses each year and we were hearing from employees that student debt had become a significant concern," said Michael Fenlon, PwC's global talent leader.
"Nationwide, student debt has soared to $1.3 trillion," Fenlon noted. "We were approached by a company called Gradifi with the idea of creating what we now refer to as the PwC Student Loan Paydown(SLP) plan. We felt that it was an attractive way to do something to help our employees and also to show true leadership."
”Student loan debt is an issue at the heart of PwC’s purpose: to build trust in society and solve important problems," Fenlon said. "It helps address a challenge experienced disproportionately by those in minority groups. It also aligns with our corporate responsibility position as a leader in the area of financial literacy.”
The student loan pay down program is available to PwC employees with the title "associate" and "senior associate," said Fenlon.
"These are generally employees in their first six years out of college," he said. "Employees are eligible immediately upon being hired and their eligibility can last for a total of six years. The benefit pays a maximum of $1,200 per year. The payments are treated as taxable income."
He also said that Student Loan Paydown does not affect the amount of money employees can put into 401(k) retirement plans.
Natixis Global Asset Management, headquartered in Paris and Boston, will kick in up to $10,000 to every full-time employee who has been with the firm for at least five years and has outstanding Federal Stafford or Perkins Loans. Boston-based Fidelity Investments will also offer the same amount to employees with student loans who have worked there for six months.
The Natixis decision to offer this benefit came out of the company’s 2015 Retirement Plan Participant Study, which found that 23% of its employees don’t contribute to a company-sponsored retirement plan because of student loan debt.
“Our mission is to help people make the right financial planning decisions that allow them to meet their goals, and that includes extending the spirit of that mission to our employees as significantly as we can,” said John Hailer, president and CEO of Natixis Global Asset Management in the Americas and Asia. “In addition to hearing firsthand from our younger employees about the toll student debt can take on other financial obligations – such as saving for retirement – our extensive research on Americans’ financial health supports the need to provide student loan repayment as a benefit.”
The benefit will consist of one $5,000 cash payment to employees after five years on their hiring anniversary at Natixis, followed by annual payments of $1,000 distributed over the next five years for a total of $10,000.
At PwC, the buck stops with co-signed loans, including the federal Parent PLUS and Grad PLUS student loans, which are not eligible for the PwC Student Loan Paydown program. Co-signed student loans are among the most expensive. Very often, the co-signer, typically a parent or guardian, takes over the payments once the student leaves school. Payment gaps and delinquencies often result.
"At this time, there is no plan to expand the Student Loan Paydown program,” said Fenlon. “However, we do provide tuition reimbursement through our Educational Support Program. That program benefits employees who are currently attending college or graduate school.”
”PwC is proud to be a pioneer among the Big Four consulting firms in providing a student loan pay down plan to employees,” Fenlon added. “Our employees have told us that student debt is a pressing concern.”
Fenlon also said that he hoped other companies will provide this benefit also “because we believe it's the right thing to do.”