According to the Society for Human Resource Management (SHRM), only about 3% of companies in the US offer to help employees chip away at student loans.
Most of the employees currently receiving this benefit work in the public sector, such as nurses, teachers, and lawyers.
But a new study from personal finance site NerdWallet finds companies in the private sector are contributing to student debt repayment for the first time.
It couldn’t come at a better time. Based on numbers from the Institute for College Access & Success, student loan debt in the US has topped $1.3 trillion. That’s an average of about $29,400 per student.
Last September, big four consulting firm Pricewaterhouse Coopers announced it will launch a program to help employees with student loan debt in July 2016. The program, Student Loan Paydown (SLP), is administered by Boston-based startup Gradifi and is currently in its pilot stage.
Under SLP, the company will contribute $100 a month towards an associate’s or senior associate’s student loan for up to six years or when the employee is promoted to manager level, whichever comes first.
According to Michael Fenlon, global director for PwC, the benefit could be worth $10,000 thanks to the impact extra payments have on interest, and shave off 2-3 years off the total payment period.
“Eighty per cent of our workforce is millennials,” said Fenlon. “They are the ones who told us that this is a big deal to them.”
Elaine Florentino, 23, an associate at PwC, is one of the 76 employees in the pilot program. She anticipates the $100 a month will cut one year off payments for her $57,000 of student loans.
“It’s kind of like a light at the end of the tunnel,” she told Business Insider. “It will get paid.”
PwC isn’t the only company choosing to offer this benefit. For instance, Natixis Global Asset Management offers $5,000 to an employee who has been with the company for five years, with the opportunity to earn an additional $1,000 for each of the next five years.
Fidelity Investments offers its full-time employees the Step Ahead Student Loan Assistance program, which contributes $2,000 toward an employee’s student loan debt annually, for up to five years.
However, many employers are hesitant to help employees pay student loans. Unlike 401(k) contributions and tuition reimbursement (for employees who pursue degrees sponsored by their employer), student loan debt assistance is not currently tax-deductible. In fact, the amount gets taxed as income for the employee. But the “Employer Participation in Student Loan Assistance Act,” a bill proposed by Congressman Rodney Davis (R-IL) and Congresswoman Gwen Graham (D-Fl), could change that by making repayment assistance tax-deductible just like tuition reimbursement is, according to Dan Macklin, cofounder of student lender SoFi.
“PwC is offering the student loan paydown because our people have told us that it’s an issue that matters to them,” said Fenlon. “It ties to a bigger commitment at our firm and it’s our goal to help solve important problems for our clients and society. We think student debt is a major societal problem and we want to be leaders in helping to solve it.”
Alternative solutions to helping employees pay debt are beginning to take shape. Student Loan Genius, a student loan benefits provider, recently introduced the Student Loan 401(k) Contribution. With this feature, employers match a percentage of what an employee pays towards student loan debt, as a contribution to the individual’s retirement plan. The contribution would be pre-tax for both the employer and the employee.
“By putting unused, already budgeted, pre-tax retirement plan dollars to work, this feature helps break down one of today’s biggest investment road blocks for employees who are held back by student debt,” Tony Aguilar, Student Loan Genius cofounder and CEO, told Business Insider. While the benefits benefits provider is working with dozens of companies to implement this feature, it hasn’t yet been offered to any employees.
“Employers are really waking up to the fact that while adding other benefits are nice, they need to be more in tune with what employees really want in order for them to acquire top talent,” said Andrew Josuweit, CEO of student loan repayment website Student Loan Hero, in an email. “Rather than simply go with the status quo and what they think employees want, it’s encouraging to see some companies are doing more to address what employees actually need to improve their financial health.”
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