Student Loan Repayment Could Be 2017's Hottest Employee Benefit

Stephen Baillie had just started working at Chegg when the company introduced one of today's most sought-after work perks: help paying off student loan debt.

Baillie signed up immediately, and for each of the past two years Chegg has sent about $1,000 to his student loan account.

“We’re using it to knock down that debt as quickly as possible,” says Baillie, a stock administrator at the textbook rental and online tutoring company. He has roughly $18,000 in student debt, down from $27,000 after about five years of payments.

More than just attack his debt, the extra money has given his family more flexibility with their budget, freeing up cash for items they otherwise might have to skip, such as music lessons for his three daughters.

Chegg was an early adopter of this growing workplace benefit, but dozens more companies have launched similar programs in the past year. And today, Penguin Random House announced it will contribute $1,200 a year to employees' student debt, introducing the benefit to an industry outside of technology, healthcare, and professional services.

Employees have to wait one year before starting to collect the contribution, but it's otherwise open to workers at every level across the publishing company, and they can claim it until they hit the $9,000 cap. Markus Dohle, CEO of Penguin Random House, sees the benefit as a way for the company to help tackle a broader societal problem of climbing student debt.

About 4% of employers offered the benefit in 2016, according to the Society for Human Resource Management’s annual report on employee benefits. Student loan repayment looks to be 2017's hottest workplace benefit, though. A Fidelity survey on employer-sponsored health and wellness program found 13% of the 129 companies that participated in the survey offered student loan repayment assistance in 2016, and 21% said they were considering it for 2017.

Behind the Trend

Nearly 70% of graduates today leave college with debt, and that’s only accounting for undergraduate debt.

More than three-quarters of young professionals in an American Student Assistance survey said help paying off their student loans would be a major factor in deciding to accept a job offer. Surveys also have shown that young workers don’t feel able to fully take advantage of a company’s retirement benefits because of the burden of their monthly student loan bills. In fact, 49% said they’d prefer help paying their student loans over other benefits, including retirement plans, according to a survey from EdAssist.

“Coming out of college, their paychecks aren’t huge and they need as much help as they can get,” says Jen Cantu, vice president of people at Trendkite, a public relations analytics firm that is in the process of designing its student loan contribution.

Gradifi, which will administer the benefit for Penguin Random House, says it has 20 companies on its platform now, but more 700 have inquired about it in the past year. The company is adding five to 10 new employers a month, CEO Tim DeMello says.

While giving actual money to employees to pay down their student loan payments is relatively rare, many more companies offer workers other benefits tied to student loans, and those often serve as a stepping stone to financial contributions, benefits administrators say.

Fintech lender SoFi has more than 400 employer partners that offer refinancing, sometimes with a reduced interest rate, to employees. So far about a dozen companies have expanded their offerings from access to educational resources and refinancing to a direct financial contribution, says Catesby Perrin, vice president of business development.

And StudentLoanGenius is working with about 70 companies, most of which offer its online tool to help employees figure out which repayment plan they should be in to pay off their debt as quickly as possible. The program uses a series of questions to help employees figure out if they qualify for consolidation or refinancing, for example.

“We like to say it’s like turbo tax for student loans,” says Tony Aguilar, founder and CEO of Student Loan Genius.

About two-thirds of employees who’ve used the program are changing their repayment strategy.

Along with a platform for contributions, Gradifi's employer clients can also offer employees the opportunity to refinance through Citizens Bank and to sign up for a MasterCard debit card where they can earn 1% "paydown rewards" toward their student loan account.

Holly Kleiman, a benefits consultant and vice president at USI Insurance Services, says her clients see student loan repayment assistance as both a recruiting tool, to attract the candidates right out of college, and a retention tool, to get young workers to stay put longer.

She often recommends companies replace tuition assistance, a long-time benefit in which employees are reimbursed for furthering their education, with a student loan repayment contribution.

What You Need to Know About the Benefit

Payments to employees' student loan accounts are currently considered income, so you’ll have to pay taxes on the benefit.

There may be a way around that, however. Student Loan Genius this summer rolled out a new component of its platform that allows employers to match employees' student loan payments with non-taxable contributions to their retirement accounts. Young employees like the option, because they don’t have to choose between paying off their student loans and saving for retirement, Aguilar says.

Employers can choose how they want to design the benefit, whether it’s capped at a set amount, like $1,000, or whether it’s tied to a percentage of income like traditional 401(k) match programs.

With benefits administrators such as Gradifi, Student Loan Genius, Tuition.io, and SoFi, employer contributions are sent directly to an employee's student loan servicer, making payment seamless for employees after they sign up.

Some employers offer monthly payments, others one-time lump sums, and payments can be used to pay down private or federal loans. Some companies design their benefit a matching contribution, so employees need to check whether they have to continue making their own payments in order to receive it. The benefit can be restricted in other ways, too. Aetna, for instance, offers up to $2,000 in matching payments to any employee, but only if he or she earned a degree within three years of applying for its match.

The benefit is almost always tied to an individual's current student debt and cannot be applied retroactively. That means if you've already paid off your debt, then you can't take advantage of it. That aspect—that employees who don't have student debt aren't gaining anything from the benefit—is one of the few criticisms of the emergence of student loan repayment assistance. Company executives and human resources experts, though, argue that's the case with other types, too, including gym memberships and transportation discounts.

What to Do If Your Company Doesn’t Offer the Benefit

Student Loan Genius has a form on its website for employees to submit their company's and human resources department’s contact information, and Student Loan Genius will then pitch its platform to that employer. Dozens of requests come in every day from that, Aguilar says.

Kleiman, the benefits consultant, also suggests that employees talk with their HR department about offering the benefit or ask about getting millennial representation on the company’s benefits committee so the priorities of young employees with student debt are considered when building the benefits package. And job hunters shouldn't shy away from inquiring about the possibility of a student loan benefit, especially if it's offered by competing companies.

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Still, the real key to getting more employers, including yours, on board might be in the hands of lawmakers. Several bills in Congress would declare employer's student loan payments tax-free up to certain limits, making the benefit far more attractive to employers as a recruitment and retention tool.

Until that happens, it's likely to remain a niche offering.

Chegg employees say the company's student loan contribution is a nice perk, but the company, like many that offer student loan benefits, was already known for solid employee benefits and workplace perks, so it doesn't necessarily feel that out of the ordinary.

"I use it to hit the principal, and it's been great to see that number going down," says Lora Kyle, who works in Chegg's HR department and still owes nearly $15,000 in student loans. "It's going to take years off my repayment."