Asabe Danpollo, 24, has one of those dream jobs that more young professionals are yearning to get.
As part of the perks of working at PwC, her company promises to pay $100 a month toward her student loan debt. The offer covers up to six years — potentially knocking off up to $7,200 in principal. The total value is more since another $2,800 or so in interest could be eliminated, too.
“Most of my debt comes from my master’s program,” said Danpollo, who earned an undergraduate degree in accounting from Michigan State University in 2016 and later a master’s degree in strategic management in Ireland from University College Dublin.
Danpollo, who comes from a family of seven children, said she put herself through college. She kept a lid on her undergraduate costs by working at the MSU library for a year and being awarded scholarships as part of the Michigan State women’s rowing team.
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She declined to say how much student loan debt she has, only noting that it’s in the five-figure range. She said she took on more debt for a graduate degree because she wanted to study in Ireland to broaden her experience and learn more about the global economy.
“I grew up in Michigan. I went to high school in Michigan. I went to college in Michigan,” said Danpollo, who graduated from Rochester High School.
She said she was immediately attracted to working at PwC, formerly PricewaterhouseCoopers and one of the big four accounting firms, once she learned about the student loan benefit when she was being recruited. Her job title is experienced associate; she works as an auditor of private companies in metro Detroit.
PwC has 706 employees in its Detroit office, plus 44 in Grand Rapids, for a total of 750 employees in Michigan.
Since launching the program in 2016, PwC — among the first large companies to offer such a college loan-related benefit — has paid off $25.9 million worth of student loan debt. About 8,000 PwC staffers are receiving payments toward their student debt.
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For those who are just out of college, it’s tempting to try to find a company that offers a student loan perk. Employers, after all, are competing for your talent. For some students, getting an extra $100 a month toward a loan payment might take 15% or 20% off their monthly costs for a while.
But what can you really expect to get when it comes to these benefits?
Here are some answers to common questions about finding an employer that will offer student loan help:
What are my chances of finding a job that covers student loans?
So far, only 8% or so of employers offer some sort of benefits specifically addressing student debt, according to the 2019 survey by the Society for Human Resource Management. But that’s nearly double from just a year ago.
By contrast, more than 54% offer retirement investment advice and 18% offer credit counseling services. About 56% of employers offer tuition assistance for employees pursuing a degree, according to the 2019 employee benefits survey.
Yet the industry expects that a third of all U.S. employers could offer student loan repayment assistance programs by 2021.
The reason? As the levels of student loan debt builds, more employers are recognizing that the challenges employees face paying off those loans simply won’t just go away.
“We have more people going to school taking on more debt,” said said Asha Srinkantiah, vice president of workplace emerging products at Fidelity Investments.
Who are some of the new players?
Beginning in the fall, insurance company The Travelers Companies and U.S. defense contractor Raytheon will start allowing employees to enroll in a new program to tackle student debt.
Employees at the companies who make payments toward their student loans could qualify for a corresponding company contribution to the 401(k) plan, according to Fidelity Investments, which is working with the companies. The benefit goes into effect starting in January.
“The employee is just paying their student loans like they would every month,” said Srinkantiah at Fidelity.
All of the company’s contributions are going directly into the 401(k), she said, based on whatever matching contributions already are in place for retirement savings.
The employee is not taxed on the contribution that’s made into the 401(k).
The idea is to offer some means to save for retirement even when someone is under financial pressure to pay off student loans.
The Raytheon and Travelers programs mirror a unique effort begun earlier by health technology company Abbott.
Abbott is offering employees a 5% match into their 401(k) plans — if the employee is contributing 2% of pay toward paying down student loans. The employee doesn’t have to contribute a dime to the 401(k) to qualify.
The Illinois-based company says: “Someone who joins Abbott with starting annual pay of $70,000 and takes advantage of this program could see $54,000 accumulate in his or her 401(k) account over a 10-year period.”
That estimate is based on an assumed 6% average annual return and yearly merit pay increases of 3% — without any 401(k) contribution of their own. And the Abbott program, like many, applies to the employee’s own student loans that they took out for their own education
About 1,000 people were signed up for what Abbott calls its Freedom to Save program, as of late July.
What kind of breaks on student loans exist?
The actual benefits vary according to different companies.
Dearborn-based Carhartt will pay $50 a month up to $10,000 to help its eligible part-time and full-time workers cover their student loan debt. Employees have to be with the company at least 30 days, if non-union, or 90 days, if in a job represented by a union. And in May, Carhartt expanded its existing program to also include Parent PLUS loans.
Carhartt has 282 employees participating. The average total loan balance is $26,376. The program has its strongest participation among those ages 25 through 39.
In some cases, companies don’t offer to help pay off student loans but instead offer ways to refinance your college debt. Auburn Hills-based FCA US began partnering in 2019 with CommonBond for Business to offer a way for salaried employees to refinance their student loan debt to lower fixed rates. More than 100 loans have been refinanced so far through April.
What’s holding some employers back?
Some employers are waiting until Congress provides tax-free status to student loan repayment assistance before offering it to their employees, according to Mark Kantrowitz, publisher and vice president of research for Savingforcollege.com.
Right now, someone who receives student loan repayment assistance directly, not as a contribution to a 401(k), will need to is treat that money as taxable income under current law.
The student loan benefit payment at PwC, for example, is taxable income. The company said it makes sure employees know this and how this benefit will help them before they sign up.
Going forward, it’s possible some of the tax rules could change.
The Employer Participation in Repayment Act of 2019, would amend the Internal Revenue Code to offer some relief. The bipartisan bill would allow some employer-paid student loan assistance to be excluded from taxable income.
Right now, up to $5,250 can be excluded from taxable income if it involves employer-paid educational assistance. But the bill would allow employer-paid student loan repayment assistance to be included under that rule, too.
Kantrowitz noted that most employers don’t offer up to the full $5,250 limit for tuition assistance. Instead, it’s more typical for an employer to offer $2,500. Given that the typical student loan repayment assistance is $100 a month or $1,200 a year, he said, there’s room for both under a combined limit of $5,250 a year.
The backers maintain that companies have increased the educational requirements for candidates to land a job. As a result, many need to take on student loan debt, as the cost of education has gone up significantly.
What can we expect next?
It’s likely, experts say, that more companies will announce some sort of student loan repayment plans.
Some big names, such as Massachusetts Mutual Life Insurance Co., are providing options for various employers to offer student loan repayment programs in the workplace.
“Employer adoption is starting to happen at an accelerated pace,” said Scott Thompson, CEO of Tuition.io, a California-based platform for employee student loan contributions.
Thompson expects that some industries — such as health care — will use the benefit as a way to stem employee turnover. One big health care company, which he declined to name, offers to match up to $350 a month in student loan debt — or up to $4,200 a year.
Employers who are offering or plan to offer student loan-related benefits often want to provide a way to hold onto talented employees and reduce financial stress that employees face, according to a survey released in April by the Employee Benefit Research Center.
At the same time, though, many employers recognize that the complexity of such programs can be a challenge. The programs can be difficult for some busy employees to understand and there are administrative challenges.
Young job seekers, though, are hyper-focused on their student loan debt. About 69% of bachelor’s degree recipients in the class of 2019 graduated with federal and private student loans with an average of $29,900 per borrower, Kantrowitz said.
About 47% of those graduating with a master of business administration degree had an average of $52,600 in debt per borrower. The MBA figures are just for the debt from graduate school. If one includes outstanding undergraduate debt in addition to the graduate debt, then 71% of graduates had an average debt of $61,900.
Greg Poulin, founder and CEO of San Francisco-based Goodly, said employees want meaningful benefits, not just clever perks like a ping pong table.
A New Jersey-based client, pdvWireless, offers to pay $100 a month toward their employee’s student loans debt, noting that its employees are putting off contributing to their 401(k)s and buying a house because of their student loan debt.
“For employers that want to attract top talent — and retain top employees — they’re increasingly adding student loan repayment,” Poulin said.
Contact Susan Tompor at 313-222-8876 or email@example.com. Follow her on Twitter @tompor. Read more on business and sign up for our business newsletter.