The New Way Employers Are Attracting Millennials

Before diving into the newest trend in talent management, consider these facts about student loan debt:

From 2004 to 2014, the average amount of debt carried by college students at graduation rose an astounding 56 percent. A recent report from The Institute for College Access and Success showed that average debt rates went from $18,550 to $28,950, and the class of 2014 had the highest average rate of debt yet in history. The average amount of debt for recipients of bachelor’s degrees increased at a rate more than double that of inflation, and in some states including Delaware, Hawaii, Illinois, Kentucky and Maryland, these rates were even higher.

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The likelihood of the newest crop of college graduates having debt varied from 46 to 76 percent and states with the highest concentrations of student debt included the Northeast and Midwest regions.

On average, according to Mark Kantrowitz, a student financial aid policy expert, the average student borrower who graduated in 2014 owes more than $35,000, and there is more than $1.3 trillion in outstanding student loans right now.

Along with these rapidly rising rates, many policymakers are pushing for something to do be done about the staggering debt new graduates are saddled with. The Obama administration has been pushing for more information to be shared with students and families, including expected earning rates and the actual costs of attending colleges.

While solutions floating around have included not only more financial transparency but also discouraging students from taking private student loans, improving loan counseling and ending the eligibility at the worst-performing colleges to obtain federal student loans, some private companies are taking matters into their own hands and using it as a recruiting method for Millennial employees.

The New Workplace Benefit

Bloomberg Business recently reported on what could be one of 2016’s biggest trends in talent management and workplace benefits, which is the re-paying of student loans by employers.

Companies including PwC and Natixis Global Asset Management are rolling out new plans starting in January that will provide student loan repayment programs to employees.

Under the Natixis plan, the company will give up to $10,000 to every full-time employee who has an outstanding Perkins or Federal Stafford Loans. The move comes after internal research showing 35 percent of company millennials who don’t contribute to a company-sponsored retirement plan cite student loan debt as the primary factor.

Ed Farrington, who serves as senior vice president of business development and retirement at Natixis, says it’s not just a problem for millennials, however. He said there are a lot of people in older generations that also have student loan debt, so the company’s hope is that they can alleviate some of this stress and burden for employees.

Farrington went on to say that as an innovative company Natixis requires the best and brightest employees, so they’re making moves to maintain their competitive edge. This isn’t an unusual sentiment among employers, particularly as the economy improves and the biggest issues they’re facing are turnover and retention.

The Natixis benefit will include a one-time $5,000 cash payment to employees once they reach five years at the company, and they’ll then receive annual payments of $1,000 dispersed through the next five years. Farrington said the company doesn’t yet know how many employees will be impacted by the new program.

PwC announced this fall it would start paying up to $10,000 in student loan debt for associates and senior associates, with anywhere from 1 to 6 years of work experience. This will be paid out directly and reach up to $1,000 a year.

“As a firm that recruits more than 11,000 new hires off campus each year, this is an opportunity to differentiate ourselves with a key talent group — millennials — and provide a meaningful way to help reduce their debt,” Tom Codd, vice chairman and U.S. human capital leader at PwC, said in a statement.

The PwC plan is being implemented by Gradifi Inc., which is a startup in Boston.

Right now the Society of Human Resources’ Management says according to its 2015 SHRM Employee Benefits Survey only 3 percent of American employers currently offer loan repayment options, but Bruce Elliot, who serves as the SHRM’s manager of compensation and benefits, says that will likely change next year.

“These companies are the canaries of the coal mine,” said Elliott. “When you are making $40,000 to $50,000 a year, it could be the difference between making rent. A 401(k) match is great, but they’ve got 40 to 45 years before they retire.”

Elliott also noted that this is a benefit that can be cut in an economic downturn, as opposed to cutting salaries. He said it’s something that’s flexible, and it isn’t going to cause the pain an employee would feel if she or he faced a salary cut. He points out. However, it’s not a feel-good benefit companies offering just to “be nice.” Rather, it’s an investment and a way companies can differentiate themselves from the completion so they can continue to access the very best of the talent pool.

Andrew Josuweit, CEO and president of Student Loan Hire, which is a site that helps graduates manage student loans, says the idea is only going to grow and expand in popularity.

 “Our advice is, let’s kill your student loans as fast as possible, then focus on building a retirement account,” said Josuweit.

In addition to the direct payment plans being offered by companies like PwC, another new idea is offering loan refinancing reductions.

Despite the popularity and growing support for this type of benefit, in the short-term it’s expected only to impact a pretty small and elite group of employees. It’s also not without its challenges, and a big one is determining who should be eligible. Other problems include how to handle employees that have loans from various servicers, and which loans would be paid first.

Employers are now looking at how to handle the intricate details as well as the overall rollout and implementation of such a benefit, but student loan debt is expected to play a large role in how employers court talent in the coming years.

December 16, 2015   Updated :November 16, 2016      

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