As overall student debt has ballooned to $1.3 trillion, and poses a significant financial burden on young people, there may be a new trend on the horizon: Employers including loan repayment in their benefits packages to help attract younger workers.
Companies that hire a high number of recent college graduates at once, such as Natixis and PricewaterhouseCoopers, are offering new employees help in paying off student loans, according to Bloomberg. The majority of employers providing the perk tend to contribute anywhere from $100 to $250 a month toward an employee’s student debt, Bloomberg reports. That may not seem like much, but it can make a big difference for those employees in the long term.
Student debt is weighing on young Americans — preventing them from making big purchases and even changing the way they think about typical life milestones like buying a house or starting a family. According to a 2013 survey by American Student Assistance, a nonprofit organization that provides information on the financing of higher education, 27 percent of respondents said student loans prevented them from buying daily necessities, 73 percent said it has delayed their saving for retirement and making investments and 43 percent said it delayed their decision to start a family.
It hasn’t become a significant trend yet, considering that just 3 percent of employers in a survey of 450 companies offer these types of programs. But it has the potential to become one, due to what experts quoted by Bloomberg call “pent-up demand” from employees. Surveys show that the majority of young workers are interested in such a perk.
However, there’s also a question of whether these benefits are actually going to help those who are struggling the most with student loan debt. After all, these companies are hoping to attract and retain competitive graduates, many of whom have graduate degrees. Although the median student loan debt for graduate students is high — $41,000, according to the New America Foundation — those graduates are also more likely to shoulder that debt burden more effectively because they’re more likely to find a job that can help pay off their debt.
Research has shown that the people with the highest debt tend to live in zip codes where people are more affluent, while those with lower debt tend to live in low-income areas. Although these former students tend to have lower debt, it’s more difficult for them to pay it off due to a lower income and dimmer job prospects, which is why they have higher delinquency rates and defaults.
At the moment, the debt repayment plans being offered by employers are unlikely to benefit former for-profit college students and for-profit college graduates, who have some of the highest delinquency rates. These colleges tend to have poorer career outcomes than traditional colleges, which often invest more in providing a high quality education, career services and other support staff. The repayment rates for many for-profit schools are very low. For example, the University of Phoenix only had 1 percent of its total debt balance repaid in 2014.