Employers are trying to help employees alleviate the burdens of outstanding student loans by offering to pay off some of the debt — more than $1.4 trillion in the U.S. alone, according to the Federal Reserve.
It's a relatively new benefit whose goal is usually described by employers as a way to attract and retain talent. Employers also say helping employees pay down debt could help them pursue goals such as buying a house, starting a family or saving more — and earlier — for retirement.
"We wanted to create a benefits program aligned with our employee base," said John Samaan, senior vice president and head of human resources for Millennium Trust Co., Oak Brook, Ill. The company, which employs a number of young professionals, launched its program in March.
Millennium Trust polled employees last year about a wide range of benefits. "They overwhelmingly wanted help in paying off debt," said Mr. Samaan, noting approximately 20% of the company's 325 employees participate in the loan repayment program. He declined to describe the terms other than to say his company will make a monthly payment up to a maximum amount in a program offered through Fidelity Investments, Boston.
"Most employers are seeing this as a separate benefit" unrelated to their defined contribution plan, said Asha Srikantiah, a Fidelity Investments vice president who supervises the firm's student debt program. Clients can choose the frequency and amount of payments and the cap on payments, as well as target the audience by salary, by tenure and even by location.
By the end of June, Fidelity had 25 clients with an estimated 9,000 employees participating in the program. That figure includes 6,000 Fidelity employees, she said. Fidelity makes payments of $167 per month with a five-year cap of $10,000. About 40% of Fidelity's 50,000 employees are eligible, The program is available to workers below the director level.
Fidelity research from 2016 showed more than one-third of all employees had student loan debt, and 79% of this group said student loan debt interferes with their retirement savings. The research was based on 496 responses from a random sample of participants in Fidelity record-kept defined contribution plans.
Half of the student loan debt group had loan balances exceeding $25,000.
However, Ms. Srikantiah acknowledged the hurdles benefits managers face when considering a loan repayment program, such as the cost to the employer, the administrative requirements, the lack of a tax benefit and the fact the loan payment is the same as raising an employee's income.