Today’s recent graduates are saddled with $1.3 trillion in student loan debt. The average college graduate owes approximately $35,000 in student loan debt. And on top of that, they are responsible for car loans, soaring rent prices and the daily cost of living.
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Millennials are expecting more benefits from their employers and alleviating student loan debt is a high priority for them. An April 2015 study from Ed Assist concluded that 33% of Millennials expect their employers to help pay down debt.
And that’s exactly what Boston-based startup Gradifi is aiming to help employers do. Gradifi has created a program to alleviate student loan debt called the Student Loan Paydown Plan (SLP). Gradifi Founder Tim DeMello said he developed the idea after seeing students at his alma mater Babson College, where he also sits on the Board of Trustees, suffer the tremendous burden of loan debt.
In the 1980s, one of the biggest issues for workers was saving for retirement, prompting the birth of the 401k plan. Now, the priorities have shifted for America’s largest living generation in the labor force.
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“Today’s issue is really the Millennials saying retirement is great, but my take home pay is $3,000 a month and I spend $600 on student loans,” said DeMello.
So far about 100 companies have signed up with Gradifi to launch the new benefit to their employees in 2016, and according to DeMello, companies ranging from 150-person advertising agencies to 200,000-person consulting firms are on the list. The first company to offer the benefit is multinational professional services company PricewaterhouseCoopers (PwC) to its thousands of employees and specifically to the 11,000 recent graduates it recruits yearly.
“We sensed that the student loan burden was a problem and it came up a lot in conversations,” said Robert Gittings, PwC’s vice chairman of Client Services.
And companies have an extra incentive to provide relevant benefits to its employees. The National Bureau of Affairs estimates that U.S. businesses lose $11 billion annually in employee turnover and retention.
“The marketplace for talent is really competitive. This is an important part of the benefits package to help us attract talent,” said Gittings.
He noted that the student loan issue touches a diverse population and that bringing in employees with a variety of perspectives helps PwC be successful in its client work.
“Since announcing it internally last week, the feedback has been off the hook from employees,” said Gittings.
Gradifi currently offers three types of plans for employers looking to implement a student loan payment plan starting in 2016. The first is a step program where an employer would contribute a fixed amount per month to an employee’s loan burden and then on the twelfth month would offer more. The second plan is a traditional matching program where an employer would match a certain percentage of their employees’ contribution. And the third program is a fixed rate that an employer would pay monthly.
Companies that provide this benefit can make adjustments and changes to the program and determine an employee's eligibility. For example, PwC will only offer this benefit to an employee in their first six years of employment.
According to DeMello, employers interested in offering this plan are not restricted to corporations hiring recent graduates. Medical, nursing and law students all suffer from tremendous amounts of debt, and Gradifi’s plan applies to any type of student loan.
“The interest has been pretty even between providing relief for undergraduate and graduate debt,” said DeMello.
DeMello predicts that the SLP will become as ubiquitous of a benefit as the 401k.