A new perk geared for millennials: help paying off student loans
Forget foosball tables or free snacks. The latest employee benefit for recruiting and retaining young employees is more practical.
On Tuesday, Fidelity announced that it had begun offering a perk that would help employees repay their student loans. All full-time employees at the manager level and below can get up to $2,000 a year paid toward their student loan, up to a total of $10,000. Employees still make their own payments, while Fidelity’s benefit is sent directly to the loan provider by a third-party vendor and applied to the principal, reducing the overall size of the loan.
The Boston financial services company joins a small but growing number of firms that are helping ease the pain of student loan debt for their millennial employees — while offering benefits that aren’t as permanent as a salary increase. PwC announced in September it would extend a similar benefit to its workers. Smaller companies such as Chegg and LendEDU offer the perk, and third-party vendors say many more are expected to announce the benefit in coming months.
A survey by the Society for Human Resources Management from June said only about 3% of companies in its survey offer the perk, but its director of compensation and benefits, Bruce Elliott, expects that number to grow.
The trend is a response, of course, to the fact that for young workers, student loans have become a major financial burden. Education debt has soared in recent years, nearly tripling since the early 1990s and reaching an average of $35,000 in 2015, according to data from the publisher Edvisors.
After asking employees about their biggest challenges, “we were surprised to learn that student loans were at the top of the list,” says Jennifer Hanson, who leads Fidelity’s “associate experience” and benefits. “It was causing them to put off important things, whether it was buying a house or getting married.”
But the move also comes as employers facing a tight labor market want to stand out in particular to younger, college-educated employees. Millennials are the largest segment of the labor force, and in response, employers are tailoring benefits to their needs. For instance, many are expanding family leave benefits.
One way Elliott says he knows a trend has legs is that start-ups get founded to cater to the market and act as administrators for the new perks — in this case, verifying that employees have student loans and then handling the logistics of paying the loans directly on the employer’s behalf.
Tuition.io, which is administering Fidelity’s program, says it is talking to some of the largest U.S. companies. The chief executive of another vendor, Gradifi’s Tim DeMello, says it has 100 companies scheduled to offer the benefit in coming months, including 19 Fortune 500 companies.
Another company, Student Loan Genius, says it’s seeing interest in a recently introduced platform that helps companies repurpose the money they’ve budgeted as 401(k) matching contributions. When workers make a student loan payment, it triggers the company to make a 401(k) contribution on their behalf.
Millennials’ “eyes are not on retirement, it’s ‘How do we get rid of our student loans, control our debt?’” says Tony Aguilar, the founder of Student Loan Genius. These sorts of benefits, he says, are “for a different generation with different problems.”
Part of the appeal of these benefits to companies is that they are flexible, Elliott says.
“It’s a way to differentiate total compensation without creating an increase in base pay,” he says. About 25% of Fidelity employees have student loan debt. The program does not have an age limit, and employees who still carry student loan debt well into middle age would benefit from it. Even employees who don’t qualify for the benefit have said “they love it,” Hanson says. “It sets Fidelity apart.”
And that, of course, is exactly what companies want when it comes to benefits like this, Elliott says. “We’re absolutely going to see a lot more innovation on benefits — especially as it relates to this generation.”
Jena McGregor writes a column analyzing leadership in the news for the Washington Post’s On Leadership section.