As companies struggle to hire and retain workers during a nationwide labor shortage and waves of post-pandemic turnover, some are offering to help pay off one of the biggest debts many young people owe: their student loans.
Even before the pandemic, interest in student loan repayment programs was rising among employers, said Craig Copeland of the Employee Benefit Research Institute.
Now in a historically tight labor market, more companies are looking at student loan relief as an offering to woo workers just like health insurance, transit passes, and gym memberships.
There’s a big need. Roughly 45 million Americans hold student loans, totaling $1.75 trillion in all. A freeze on student loan repayments launched during the pandemic will end in May. And federal legislation passed in 2020 allowed employer student loan repayments (of up to $5,250 annually) to be classified as tax-free benefits through 2025.
“Lately, you’ve been seeing more interest,” Copeland said. “[Employers] really want workers back, and they’re having a hard time attracting and retaining them. So these benefits are becoming more important.”
In fact, 31 percent of large companies surveyed by the EBRI said they plan to offer student loan assistance within the next two years. They might look at the experience of Fidelity Investments, which launched such a program in 2016.
Since then, almost 15,000 Fidelity employees have participated in the benefit, said Jesse Moore, who runs Fidelity’s student debt program. In October, the company said it would expand the cap on loan repayment from $10,000 to $15,000.
Fidelity began offering to help pay student debt after hearing the negative impact loans were having on workers’ futures, Moore said. An employee survey found that 39 percent of Fidelity workers put off saving for retirement and 30 percent weren’t starting families due to student loan stress.
Take Fidelity employee Erin Hall, for example. Fidelity’s student loan repayment program was a big reason she chose to work at the company. Now she’s a senior manager of new product marketing at Fidelity, where she met her husband Rob, who is also enrolled in the benefit. Each receives $179 a month in loan repayment over a maximum of seven years, or just over $30,000 in all. That, in turn, helped enable Hall and her husband to buy their first house together a few weeks ago.
“We’ve been more comfortable and confident to take those steps in our personal lives that maybe we wouldn’t have been able to do so soon due to our student debt,” Hall said. “This benefit has really set us up for success for our future and our main life events that we’ve been going through.”
Employers who help pay off workers’ student loans might have a better chance of hiring talent and keeping it, too. A Fidelity analysis of employers who offered student debt repayment plans found a 78 percent reduction in turnover over one year. Fidelity employees that work at least 20 hours a week are eligible for the benefit from their first day on the job.
Vertex Pharmaceuticals, too, offers to repay student loans of full-time workers as soon as they’re hired, up to $10,500 per employee. The company began its student loan repayment program in 2019 to ease the emotional toll student loan debt can take on employees’ financial wellbeing and retirement plans, a Vertex spokesperson said.
“Since enrolling [in the student loan repayment program], I’ve seen a significant reduction in my student loan principal balances and I’m on track to pay them off much quicker than I originally forecasted,” said John Dennis, a brand and digital communications associate director at Vertex.
Other New England companies offering the benefit include Blue Cross Blue Shield of Massachusetts, Amica Insurance, and Natixis Investment Managers. And while private companies are relatively new to the field of student loan repayment programs, the federal government has long used the benefit to attract potential workers in fields that require advanced degrees but offer relatively low pay, like nursing.
Take the VA Boston Healthcare System, for example, which uses student loan repayment as a recruiting and retention tool for such candidates, said Winfield Danielson, the facility’s public affairs officer. Employees there (and at many other federal jobs) can receive a maximum payment of $60,000 toward their student loans. But not all workers qualify.
“One of the challenges of student loan repayment is not all employees necessarily have access,” Danielson said. “So we can only apply it right now in a targeted fashion. And there are some high-demand entry level professions where it simply doesn’t apply, such as food service workers.”
And while the federal government and larger companies such as Fidelity have the financial resources to help employees pay off student loans, it’s harder for smaller employers who are also trying to compete for workers, Copeland said.
“It can be an expensive benefit, so it’s not necessarily something easy for the small business employer to do,” Copeland said. “So that makes it a challenge, because they’re also searching for great talent, but they might not be able to provide that type of benefit.”
Borrowers facing the greatest challenges paying back student loans are also less likely to receive this benefit from their employers as they are more likely to be unemployed or have unfinished degrees, said Sameer Gadkaree, president of The Institute for College Access & Success, a nonprofit that advocates for affordable education.
To fully target the larger issue of student debt in the United States, federal action is needed, he added, such as increasing the Pell grant to help low-income students pay for the costs of college and reforming the student loan default system.
“While this employee benefit may help employers get people in the door, and certainly may help a few folks pay down their student loan debt, it’s not a systemic solution to the problem of student debt payments that people can’t afford,” Gadkaree said.
Annie Probert can be reached at email@example.com.