- A college degree may lead to a lucrative career, but the cost of tuition is putting some people so far in debt that a even decent job can’t fully lift the burden.
- Companies big and small – including IBM and fitness startup Peloton – offer student loan repayment benefits to employees.
- Research shows employee financial stability is linked to overall well-being and work performance, and workers overwhelmingly prefer companies who offer help with student debt, often over retirement benefits.
- This article is part of Business Insider’s ongoing series on Better Capitalism.
A lucrative career typically relies on having a college degree. But all too often, expensive tuition costs lead to debt that even a decent-paying job can’t cover.
In 2018, 44.2 million American borrowers owe $US1.48 trillion in student loan debt – $US620 billion more than Americans owe in credit card debt, according to Student Loan Hero. And student loan debt rises annually. The average debt for student borrowers in the class of 2017 was $US39,400, 6% higher than the class of 2016, Student Loan Hero reported.
“The crushing weight of having to pay a student loan off coupled with low entry-level salaries creates a recipe for financial stress that can snowball,” Jeremy Straub, CEO of Coastal Wealth, told Business Insider.
“Financial stress will affect your mood, concentration, and overall performance [at work],” Straub said. “Ultimately, this stress costs the employer money through loss of productivity.”
More and more companies are starting to recognise this and are implementing benefit programs to help employees manage and pay down their college loans. In some cases, it may help with employee recruitment, too.
Financial stress can lead to work stress
Companies including PWC, First Republic Bank, Penguin Random House, IBM, Peloton, and Honeywell also have benefits in place to help with student loans, in an effort to retain quality talent and boost employee performance.
“Any benefit that you can offer which creates a ‘people first’ mentality and shows you put purpose before profits in your company culture is a good thing,” Straub said.
“Employees who are happy and free of worries can do their best,” Barbara Brickmeier, vice president of benefits at IBM, told Business Insider. Multinational technology giant IBM‘s program, MoneySmart, offers confidential financial coaching for employees.
“They can bring their best selves to work and they can work more productively for themselves and for the company, so with that in mind we believe [MoneySmart] does help the bottom line for IBM.”
The MoneySmart program began over 10 years ago and 25% of IBM employees partake in the program annually, according to Brickmeier. While IBM pays for financial counselors to assist employees in strategising their finances, it does not make direct contributions to employee student loans. The program helps employees refinance their loans and negotiate discounts off their loan rates, Brickmeier said.
In the past three years, the MoneySmart program at IBM has helped employees refinance about $US50 million worth of student debt – a total savings of about $US15 million over the life of the loans, she said.
Brickmeier says IBM recognises that employee financial health is a crucial aspect of overall well-being, and some research backs that up.
A 2017 survey conducted by Willis Towers Watson asked 31,000 United States employees in 22 markets about health and well-being related to work. In the study, over one-third of employees reported their financial situation is negatively affecting their lives.
Additionally, the study found employees who are struggling financially describe their health as “poor” and 31% say their money concerns affect work. In contrast, workers who did not report financial unrest say they are in good health, with only 5% claiming high stress levels.
And it turns out that the companies putting programs in place to remedy widespread financial stresses among employees are more attractive to potential candidates.
A 2017 study by Oliver Wyman surveyed over 3,000 households with a bachelor’s degree or more – about one-third of which had outstanding student debt – to gauge the importance of student loan repayment benefits offered by employers.
The research found 45% of employees say student loan repayment is the most desirable benefit, placing it above retirement contributions and health insurance. When it comes to choosing one job over another, 90% of employees said a student loan contribution benefit would positively impact their decision to accept an offer. Currently, only 4% of employers offer help with student debt as a benefit, according to the report.
Fitness startup Peloton puts over $US15,000 a month toward employees’ student loan debt
“[Student loan debt] is a huge issue and lots of people come out [of school] with hundreds of thousands of dollars of student loans and come into a job and have to keep paying that – potentially for years,” Amy Stoldt, vice president of people at Peloton, told Business Insider.
Peloton introduced Gradifi, an online financial assistance program for employees, to the employee benefit package last spring. More than 150 of Peloton’s 900 employees participate in the program – that’s over $US15,000 in contributions to student loans every month. Gradifi reports a 30% reduction rate in student loan repayment time among people employed by companies which use the platform.
“When Peloton first introduced this benefit, I had about $US35,000 left [in loans],” a Peloton employee who already paid off one loan through the program told Business Insider. “I’ve been paying off pretty aggressively because I feel like it’s just this dark cloud that follows me around. I finally feel like I see the light at the end of the tunnel though.”
The employee continued: “This benefit makes such a difference both physically and emotionally, especially with the support that comes with Peloton acknowledging that this is a burden.”
NOW WATCH: Ideas videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.