After a three year pause, U.S. federal student loan payments are set to resume Oct. 1, and you better bet your employees will be affected.
The Society of Human Resource Management’s 2023 employer benefits survey found that only 8% of organizations said they offer student loan benefits to employees. I talked with some companies that offer the benefit, and the common thread for doing so is to support employee financial well-being and to attract and retain talent.
Take for instance Nvidia, the leading maker of data center gear used in AI systems, that has now positioned itself as the key beneficiary of the AI boom. Back in 2016, the company decided to help recent graduates pay back student loans.
Nvidia offers all U.S. employees who have graduated within the past three years with a U.S. student loan reimbursement as a benefit, according to a company spokesperson. Employees (full- and part-time) who work 20 or more hours per week are eligible for up to $350 per month toward student loan repayment. There is a lifetime maximum of $30,000. However, contributions must be in addition to an employee’s regular monthly payment and made directly to the loan servicer.
I asked Colette Kress, EVP and CFO of Nvidia, why this benefit remains a priority for the company. She explained it’s a recruiting tool and allows employees to plan “for the future so they can focus on doing their life’s work here,” Kress says.
Taking a look at the retail industry, Tracey T. Travis, EVP and CFO at The Estée Lauder Companies, shares a similar perspective. Travis says she’s “particularly proud” of the company’s Student Loan Contribution Program. The company contributes up to $100 per month toward an eligible U.S. employee’s student loan with a lifetime maximum of $10,000. The student loan repayment program began in August 2017 with the first payments being made in September 2017.
It’s not just a nice-to-have option, according to Travis. “We believe that contributing to student loan repayments is not only a strategic business decision, but it’s also the right thing to do,” she says. This helps the company to “strengthen and grow our incredible talent base, while enriching the lives of our employees and the communities in which we live and work,” Travis says.
Jesse Moore, SVP and head of student debt at Fidelity Investments predicts that many employees are feeling “overwhelmed and concerned—and rightfully so.” For the last three years, 60% of Federal student loan borrowers have been taking advantage of the payment pause, Moore says. He also points out that some younger student loan borrowers have never made a student loan debt payment before, Moore says.
Fidelity’s 2023 College Savings + Student Debt Study found that two-in-three recent college graduates taking advantage of the Federal student loan payment pause have “no idea how they are going to start repaying their student loans once the emergency pause is lifted,” he says. And one of the primary ways employers are leaning in to help is by making payments directly toward their employees’ student loans, Moore says.
Fidelity began offering its student loan assistance benefit to associates in 2016. Currently, eligible associates who are regularly scheduled to work at least 30 hours per week can enroll in the program to receive a maximum of $15,000 over a maximum of seven years’ worth of monthly payments.
Moore says an additional way employers are assisting employees is under the Secure Act 2.0 of 2022, which allows offering a match into a retirement plan when the employee makes a student loan debt payment.
A Fidelity analysis of its clients offering a student debt repayment plan found a 78% overall reduction in turnover, Moore says. That’s a stat that any finance pro can appreciate.