Mack Boring & Parts of Somerset, N.J., wants to retain loyal employees, so this year the small business rolled out a student loan repayment benefit.
Mary Hogan, director of human resources, heard at a conference that about 1,800 U.S. companies now offer student loan payments as a benefit, so she encouraged Mack Boring management to sign up, using a repayment app called Goodly.
“We rolled out Goodly as a way to reimburse student loan payments. Our hope is to retain all of our employees, even some who are parents, who have student loans,” Hogan said. Mack Boring wanted a low-cost service to administer the benefit, and “we don’t want to be in the middle of looking at our employees’ student loans. That’s not our intention. So Goodly is the go-between, and it’s a simple pull from a bank account."
Mack Boring is a family-owned diesel and marine engine distributor, but the demand for this benefit among its 55 employees was keen. Goodly charges $6 per employee per month, and Mack Boring contributes $100 monthly to its employees’ student loan payments. Goodly works with about 500 companies, according to founder Greg Poulin.
Other Philadelphia-area companies also like this as a benefit. Brett Torgin implemented Goodly at Philadelphia-based real estate firm Odin Properties, and said that "we anticipate participation at around 20%, which is about 40 people.”
Sense a trend? Boston-based investment giant Fidelity also jumped into student loan payments as an ancillary retirement benefit.
Employers allow payments toward student loans to qualify for the company’s contribution to that person’s company 401(k) plan. If an employee makes monthly student loan payments, to help them save for retirement at the same time, an employer contribution will be made into a Fidelity retirement account.
Both Travelers and Raytheon will enroll in the program this fall, with the benefit going into effect in January.
With 45 million borrowers in America owing more than $1.52 trillion in student loan debt, employers are jumping on this benefit. Benefits company Unum, working with Fidelity, will allow employees to transfer carryover paid time off (PTO) into a payment against student debt beginning next year.
Other companies make after-tax contributions toward student loans on top of payments made by the employee, which can reduce loan duration and interest. Kronos Inc., a workforce management and HR cloud software firm, has offered employees student loan repayment assistance since 2016.
“As a leader in both the retirement and student debt benefits space, we are actively collaborating with clients to develop benefit programs designed to meet their talent needs, promote financial wellness, and optimize their benefits budget,” said Sangeeta Moorjani, head of product for workplace investing at Fidelity.
Fidelity began administering the student debt benefit to its plan sponsor clients in 2018, and it began offering a program to its own employees in 2016. To date, more than 10,000 Fidelity employees have saved $55 million in student loan debt — $37 million toward principal payments plus an additional $18 million in interest payments — since the program began, with an average savings of $5,500 per person.
As of July 2019, Americans owe $1.59 trillion in student debt, an average of $37,172 per debtor. According to the Federal Reserve, that’s more than three times the country’s total student loan debt in 2006.
For the average college debt holder, with $37,000 in debt, that ends up being about a 7.7-year delay in home ownership. Students with debt are also putting off saving for retirement (41%) and having children (34%), according to a 2019 survey of 1,000 students by Clever Real Estate.
In short, the wealth creation of a college degree isn’t what it used to be. As the Wall Street Journal noted last week, a college degree may not pay off for everyone: “First, the wages of college graduates have remained mostly flat this century, after inflation. Second, the cost of attending college has soared. Third, even with higher salaries, significant numbers of college graduates in recent years are failing to build the kind of wealth that previous generations did.”