In a step that will almost certainly lead to wider embrace of college loan payback benefits, the American Bankers Association said that next month it would begin helping employees with their college-related debts.
The ABA will pay up to $1,200 per year per eligible employee toward student loans, above and beyond salary and any other benefits. The organization, which represents banks that employ more than 2 million people, said it is encouraging each member bank to take a similar step.
Student debt payoff is among the next wave of benefits that will permeate corporate America. Only 4% of companies currently offer such a benefit, according to a report from the Society for Human Resource Management. But among them are trend setting companies like financial powerhouse Fidelity Investments and the global business-consulting firm PwC.
Fidelity offers the Step Ahead Student Loan Assistance program, which contributes $2,000 annually for up to five years. PwC offers the Student Loan Paydown program, which provides $100 a month for up to six years.
Research shows that student debt is a drag on the economy as graduates delay the purchase of cars and homes, and even weddings. On the campaign trail, Democrats and Republicans have both said they intend to take steps to help young people get out from under their debt cloud. Millennials are accumulating massive liabilities, a new report this coming week will show. Some 70% have at least one source of long-term debt and 34% have two sources, according to the National Endowment for Financial Education (NEFE).
To make ends meet, a quarter of Millennials have raided their retirement savings and another quarter are overdrawn on their checking account. A similar percentage has unpaid medical bills. Half of those with student debt say they will never be able to repay it. Many Millennials also owe credit card late fees and pay only the minimum monthly amount due, NEFE found.
Student loan repayment benefits are increasingly seen as a powerful recruitment and retention tool: 76% in an American Student Assistance survey said such a benefit would be a major factor in considering employment. It’s part of trend where employees who understand the financial hurdles in front of them increasingly are insisting on financial guidance as well as more direct assistance, like loan payback. Already, most large companies offer some kind of financial wellness package. Student debt repayment looks to be the next big addition to those programs.