Fidelity Investments is offering a new employee benefit: It's helping workers pay off their student debt.
The Boston-based securities powerhouse will pay up to $2,000 a year in its employees' student loan principal, to a maximum of $10,000 over five years. Employees with six months or more tenure are eligible for the program, and the money doesn't have to be paid back if they leave.
“We went on a listening campaign, talking to managers and associates about the key challenges they're facing,” said Jennifer Hanson, head of associate experience and benefits at Fidelity. “We found significant concerns around student debt. Not only were students struggling with student debt, they were
putting off things like getting married, buying a house and having a baby."
So far, more than 5,000 Fidelity employees have signed up for the benefit, which doesn't reduce any of the other benefits Fidelity offers, Ms. Hanson said. “We would hope it will help people get out of debt faster."
Parents who have taken out loans to fund their children's college aren't eligible for the benefit. While those who opt for the benefit skew younger, Ms. Hanson said that people well into their 40s still have student loan debt and were opting for the program.
One drawback: Any student loan repayment paid by the employer is taxable to the employee. “It does raise their tax bill a bit,” Ms. Hanson said.
On the other hand, the benefits of repaying a student loan early are substantial. The average student who graduated in 2015 left with a debt of $35,000, according to
Edvisors, a web site for student borrowers. On a 10-year, 7% loan, the monthly payment would be about $406 and the total payments would be $48,720. An early five-year payment of $10,000 — $166 a month — would reduce the pay-off time by about three years, and save thousands in interest.
Fidelity, which has $5.2 trillion in total customer assets, is the first major financial services company to launch a student loan employee benefit. “We don't think we'll be the last,” Ms. Hanson said.
Natixis Global Asset Management, a $865.9 billion Boston manager, announced a similar program in December. Each Natixis employee who has worked there at least five years will be eligible for $5,000 toward outstanding Stafford or Perkins federal loans. They will also be able to get $1,000 a year for the following five years.
