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The small group of employers paying their employees' student loans continues to expand as mounting national student debt keeps workers from saving for retirement or reaching major life milestones, like buying a home.
Fidelity Investments, the latest in a string of firms to announce an employee student loan payback program, this week said that 5,000 employees have signed up for the Boston-based financial services firm's student loan assistance program launched in January.
New York-based PricewaterhouseCoopers L.L.C. announced its student loan repayment benefit in September, and Boston-based Natixis Global Asset Management S.A. did so in December.
The three financial services companies are a few of the only 3% of employers paying off their workers' student debt, according to the Society of Human Resource Management's most recent employee benefits survey.
But some say the number may be set to grow.
For one, Tim DeMello, founder and CEO of Boston-based startup Gradifi Inc., said the growth in the interest surrounding student loan repayment benefits is “sort of phenomenal.”
“There is huge interest in this,” he said, adding that Gradifi, which helps employers make contributions toward workers' student loan debt, fields between 20 and 25 calls from interested employers each week.
The company, which administers PwC's program, has about 100 employers signed up to launch a student loan repayment benefit this year, Mr. DeMello said.
The employers Gradifi works with are a mix of sizes and industries, but usually employ a lot of millennial workers, Mr. DeMello said. “The human resources teams know that the workforce by 2020 will be 50% millennials, and they know (student loan debt) will be the No. 1 thing on their minds,” he said. These employers typically contribute about $100 a month toward eligible employees' student debt, he said.
According to the Pew Research Center, millennials actually surpassed Generation X in 2015 to become the largest cohort in the U.S. workforce.
“The employer gets the benefit of attracting and retaining the employee. So for instance, PwC — when they go out on college campuses they recruit 6,000 people. They are able to offer a program that is different than anybody else,” Mr. DeMello said.
Outstanding debt for federal student loans currently stands at $1.2 trillion, according to the U.S. Department of Education's Federal Student Aid office. And about 70% of 2014 college graduates had student loan debt, with an average of $28,950 per borrower, according to the nonprofit Institute for College Access and Success.
Workers who are strapped with debt often have a difficult time saving for retirement in the company 401(k), sources have said. Others may delay major life milestones like buying a house or having a child, Jennifer Hanson, head of associate experience and benefits at Fidelity, said in a statement Tuesday.
“As a financial services firm, this was really concerning to us, and we felt that providing a benefit like student loan repayment assistance helps us to address a very real financial concern that is impacting our employees directly,” she said.
Fidelity's Step Ahead Student Loan assistance program provides employees who have been with the company for more than six months $2,000 per year toward their student loans. Eligible participants can receive up to $10,000, according to the company's statement.
The benefit is paid monthly, and employees are not required to pay it back if they leave the company, Fidelity said.
The firm partners with Santa Monica, California-based Tuition.io to deliver the benefit.
“Never before has such a large percentage of the millennial workforce been burdened with levels of debt from their education that have a direct impact on their ability to pay their bills, save for retirement, and stay in the jobs they love,” Tuition.io CEO and founder Brendon McQueen said in an email. “Employers are recognizing that if they want to attract and retain the right talent, they need to start addressing a critical need that faces many of their employees.”
Tuition.io works with fewer than 100 employers of different sizes, and employer contributions usually vary from $50 to $200 per month, Mr. McQueen said in the email.
The growth at the company “has been incredible,” he said.
“There is an inflection point wherein education costs have risen and incomes haven't kept up, which has created the perfect time to introduce a student loan contribution benefit,” he said.