Student Loan Repayment: The Next Perk for CU Employees?
Some credit unions may soon begin repaying some of their employees’ student loans in an effort to attract and retain talent.
Earlier this month, Beaverton, Oregon-based employee benefits consulting firm CU Benefits Alliance launched CU Student Loan Repayment Benefit — a program through which CU employers contribute dollars toward employees’ student loan payments. The move is aimed at helping credit unions capitalize on a growing trend in employee benefits, CEO John Harris told CU Times.
“Normally, [credit unions] are going to say if you contribute $100, we will match up to $50 or $100 or something like that. Best practice ranges anywhere from $50 to $200 of contribution by the employer,” he noted. Employees with $30,000 in student debt at 6% interest and 10-year payoff term could save $11,670 in interest at a $100 monthly contribution level, according to the company.
The employer contributions are post-tax, Harris said, but a bill introduced in Congress this year could make those benefits pre-tax.
To be sure, help with student loan repayment is still a rare benefit — only 4% of employers offered it in 2017 and 2016, though the number has ticked up from 3% in 2015, according to data from the Society for Human Resource Management. Harris estimated that less than 1% of credit unions offer the benefit right now.
Nonetheless, credit unions and employers across the country may soon feel pressure to add student loan repayment help to their benefits packages.
According to a 2013 survey by college financing nonprofit American Student Assistance, 83% of respondents said that, all other things being equal, if an employer offered assistance with student loan repayment, it would be the deciding factor or have considerable impact on their choice to take that job.
“If you think about this, you have life insurance, group life, group disability through your employer,” Harris noted. “Most employees never see that benefit ever. Most people don't die when they're at their employer. Most people don't have disability at their employer. They never get those benefits. This benefit, they see it every month.”
Though millennials are a prime target, Harris said they’re not the only demographic that may value help paying down student loans.
“What we're finding is parents of students and grandparents of students are getting loans so that their kid doesn't have debt when they graduate,” he explained. “Now the parents have the debt. Not only are you providing a benefit that would help those 25-year-olds coming into your workforce, but you're also providing the benefit to those 40-year-olds who have kids coming into college or out of college.”
Harris expects around 100 credit unions to start offering student loan repayment benefits in the next 12 months. In five years, he expects as many as half of all employers to offer it.
“I think as an employer, we need to be creative because if we're no different than the bank or the other credit union down the street — we always think we have a better culture, better whatever, better service package — if we don't get creative with what we're offering to work for us, then I think we're going to have a hard time competing for the best talent,” he warned.