Grace Peloquin pressed “enter” on her laptop and let out a huge smile. Just five years out of college, she just made her final student loan payment.
“I did a happy dance afterwards,” said Peloquin who graduated from St. Anselm College in New Hampshire in 2014 with $18,000 in debt. “I took a picture of the computer screen and texted it to my parents. Neither of my parents went to college so I think it was really special for them.”
Peloquin got help paying off her loans from an unlikely source: her employer. Peloquin works at Fidelity and received an additional $2,000 per year toward her loan repayment. And that adds up. Had she been making minimum payments each month, Peloquin would not have finished for another five years. Now, she and her husband have far more financial freedom. In fact, they just bought a car.
“We felt so much more free to do that knowing we had extra money in our budget,” she said.
Fidelity is one of a growing number of companies helping employees pay off student loans. In fact, the number of companies offering student-loan repayment benefits doubled in just one year — climbing from 4% in 2018 to 8% in 2019, according to the Society for Human Resource Management’s 2019 Employee Benefits Survey. Meanwhile, Employee Benefit Adviser found that more than 10% of employers plan on offering the benefit this year — making it the top new benefit offering identified in the survey.
And it could be a major difference maker in helping younger workers choose between potential employers. A 2018 study by the American Institute of Certified Public Accountants (AICPA) found that 41% of recent grads or soon-to-be graduates ranked student-loan forgiveness as a top benefit that would help them achieve their financial goals. That ranked higher than traditional benefits like a 401(k) match.
At Fidelity, the student-loan repayment program is paying major dividends, particularly in employee retention. Fidelity retained 70% of the cohort participating in the student-loan program over the past three years compared to only 55% of the cohort not participating in the program, according to Cindy Silva, Fidelity’s Head of Financial Benefits. Silva said the program positions Fidelity as an employer of choice and “helped open us up to potential new hires who wouldn’t have even considered us.”
A “Tailor-Fit” Benefit
Another company offering the benefit is Nvidia, a technology company in Santa Clara, California. It matches each student-loan payment dollar-for-dollar up to $6,000 per year and capping at $30,000 over a five-year period. The reason they offer the benefit is simple: their employees asked for it.
“We hire several hundred new college grads per year, and we want to make sure our benefit programs are tailor-fit to where people are in life,” said Beau Davidson, vice president of employee experience at Nvidia.
So far, 120 employees have taken advantage of the student-loan repayment benefit and Nvidia has reimbursed close to $700,000 in student loans to date, said Davidson. The program is helping Nvidia recruit top talent in a tight tech job market where they compete with popular companies like Apple, Facebook and countless others.
“We go to the same recruitment fairs and recruitment opportunities as other employers, and we have a very unique offering that helps attract a diverse pool of candidates,” said Davidson.
For employees receiving the benefit, it makes a big difference. “It’s attractive when you think about all the costs you have when getting out of college. Getting a new apartment. Potentially getting a new car. Furnishing that apartment. Having a social life. But you’re saddled with student-loan debt. Nvidia wanted to be helpful and ensure employees were not just working to pay off their student loans,” he said.
Will Loan Payoffs Go Prime Time?
Will student-loan repayment benefits go mainstream? Davidson and Silva think more employers will continue jumping in.
“Being a benefits professional, I know this is a hot area and I do believe more and more companies will offer this benefit,” said Davidson. “It’s to their benefit to offer a program like this to help ease people into the workforce.”
Silva agrees. “The numbers are gradually growing. We went live with our program in 2016, and I’m still talking calls from employers interested in talking about how to develop programs of their own.”
With student loans being a hot-button issue on the presidential campaign trail, there’s a chance that companies could receive some kind of tax incentive to repay student loans. That, says Silva, would be a game-changer.
“If there’s a change to the taxability, we will see a lot more companies jump in.”