Employer assistance with student loan debt huge lure for millennials

Employer assistance with student loan debt huge lure for millennials
Recent survey shows 8% of U.S. employers in 2019 offer contribution plans to staff.
AUG 07, 2019
Like millions of her peers, Nicole Read graduated with thousands of dollars of debt. Unlike most of them, she's getting direct help from her employer to pay it back. (More: Advisers step up efforts to help clients manage student loan debt) The 26-year-old's job at event organizer Live Nation Entertainment in Beverly Hills, Calif., comes with a benefit that may be starting to catch on at U.S. companies: Contributions to her student loan bills. Offering such an incentive helps businesses lure prospective employees as they grapple with tight labor market conditions marked by a jobless rate near its lowest in almost five decades. In Ms. Read's case, it's $100 a month. As a result, "I'm paying like $30 over my minimum payment every month, so it's gotten me to pay off my interest a little quicker," she said. "It just kind of gives me a bit of breathing room." Such plans are spreading. They were on offer to staff at about 8% of U.S. employers in 2019, more than double the 2015 level, according to an April survey by the Society for Human Resource Management. Another study by business adviser Willis Towers Watson found that 32% of firms are considering introducing a similar benefit by 2021. "If you have a young demographic, offering benefits like student loan repayment could be the way to go," said Alex Alonso, chief knowledge officer for SHRM. Pronounced competition for talent and the elevated debt burden for a generation of Americans making their way into the workforce are driving the change. Millennials make up more than half of Live Nation's U.S. labor force. The balance on outstanding student loans reached $1.6 trillion at the end of the first quarter, and more than a quarter of that is held by people younger than 30. The effects reverberate through their social and economic lives, making it harder to start a family, buy a home or purchase big-ticket items, research shows. The federal government is considering giving companies a break for helping employees with their debt. The Employer Participation in Repayment Act, introduced in the House and Senate in February, would provide tax relief to firms that do so. It has bipartisan sponsors, including Democratic presidential candidates Seth Moulton and Amy Klobuchar. Other Democratic contenders, like Senators Bernie Sanders and Elizabeth Warren, have proposed more sweeping fixes that include writing off loans. "Helping employees get out of debt faster is a win-win, both for the employee and for our productivity," said Katie Wandtke, director of human resources at Cybrary, a cyber-security firm based in College Park, Maryland. It's not just smaller shops adopting the benefit. Larger companies, including professional services powerhouse PricewaterhouseCoopers, are catching on too. (More:What advisers need to know about working with student loan debt) Live Nation began offering the benefit in early 2017 and has helped employees save over $4 million. More than 80 of the company's workers have been able to completely pay off their loans, according to Live Nation. The event organizer works with startup Tuition.io, which specializes in helping companies set up such programs and has clients including Fidelity Investments and Staples. There are other platforms in the market too, including Goodly, which works with Cybrary, and Gradifi, used by PwC since 2016. Paying an extra $30 a month more than the minimum, like Ms. Read says she does with her employer's help, makes a difference. For example, for a 10-year loan of $50,000 at 5%, it would save close to $1,000 in interest payments over the life of the loan – allowing the borrower to clear the slate eight months early. "Jobs in the entertainment industry like this one, they're not high-paying jobs necessarily," said Ms. Read. "So this kind of helps offset that wage difference and it's really helpful for people like me."

Latest News

House passes bipartisan bill to shield seniors from investment fraud
House passes bipartisan bill to shield seniors from investment fraud

Financial services trade groups back new authority letting mutual funds pause suspicious redemptions from vulnerable investors

Texas man says SEC and fund could make him pay twice
Texas man says SEC and fund could make him pay twice

A $141M judgment and a federal asset freeze collide over one shrinking pool

Osaic executives Kristy Britt and Greg Cornick to leave
Osaic executives Kristy Britt and Greg Cornick to leave

The firm's CFO and EVP of Wealth Management Solutions are the latest executives to exit the broker-dealer.

Estate planning becomes a client retention issue for financial advisors, survey finds
Estate planning becomes a client retention issue for financial advisors, survey finds

Clients are saying they would consider switching advisors if another professional offered estate planning services, according to a new Trust & Will survey.

Candidly adds AI agents for Trump Accounts, workplace benefits
Candidly adds AI agents for Trump Accounts, workplace benefits

CEO Laurel Taylor says the fintech's composable AI stack helps workers optimize dollars across Trump Accounts, 529s, 401(k)s, and other employee benefits.

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income

SPONSORED Why direct indexing stopped being optional

Direct indexing is on pace to outgrow ETFs and mutual funds. Northern Trust's Ken Lassner explains why the advisors who get it wish they had started sooner.