If you’ve graduated from college with thousands of dollars of student debt, your future employer might help you pay it off.
Fidelity Investments recently announced a Student Debt Employer Contribution program to aid companies that decide to help pay off student loans as part of an employee benefits package.
Everyone knows student debt is enormous: According to the Federal Reserve, student loan debt was $1.31 trillion at the end of 2016, and the average college graduate in North Carolina owed $25,562.
And more people are defaulting on their federal student loans. According to a report this week from the U.S. Department of Education, 11.5 percent of borrowers who began repaying their loans Oct. 1, 2013, had defaulted by Sept. 30, 2016 – that’s up from 11.3 percent in 2015.
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In the past few years some employers have begun including student debt re-payment as an employee benefit. “Companies are creating them because their employees are saying this is what they’d like,” said Barry Coleman, vice president of communications for the National Foundation for Credit Counseling.
Programs like Fidelity’s help companies that might not have the financial expertise to deal with student loans, which can be complicated.
“If you have an employee base of 1,000 people, you could literally have hundreds of institutions that hold these student loans,” said Akhil Nigam, Fidelity’s Managing Director. “We take care of the record keeping – which loans should be paid, to which financial institution.”
Each employer’s benefit package is slightly different. Some pay $50 a month while others as much as $500 a month toward an employee’s student loans, Nigam said. Employers can also cap payments – $10,000 is a popular cap for many employers, Nigam said. Although, he added, about one-third of employers don’t put a limit on what they’ll pay as long as the employee remains with the company.
The company is piloting the program now and planning a full roll-out early next year.
Ward and Smith, a law firm with an offices in Raleigh, is one North Carolina company that has had success with a student loan payment program. Every month, the firm pays $100 toward 13 employees’ student loans. Mike Epperson, the firm’s executive director and chief operating officer, said the program is a way to “attract and retain the best talent we can.”
While in theory getting $100 paid on your student loans is no different than getting $100 more in your paycheck, prospective employees appear to prefer the loan repayment.
Indeed, 86 percent of young workers say they’d commit to their employer for five years if they helped pay off their student loans, according to a survey last year of 502 workers between the ages of 22 and 33.
“Basic economics would tell us that’s just money they would have gotten in salary,” said Jeffrey Dorfman, professor of applied economics at the University of Georgia, but “a lot of people like it. And, if you are bad with finances and you would spend all the money, you might actually be better off.”
This benefit resonates very strongly with millennials, Nigam said. “You are telling people that you understand their problem,” he explained.
Fidelity, which has offices in Durham and Raleigh, offers its own loan assistance program for employees, paying $2,000 a year toward student debt for staff who have been with the company for more than six months, said a spokeswoman. It caps the payments at $10,000.
While these programs may help individual employees, they are unlikely to substantially decrease overall student debt, Dorfman said. “There just aren’t that many companies that are willing to do this,” he said.