When Tom Taylor graduated from college in 2010, he had an outstanding student debt of $70,000 and no full-time job. Today, Taylor is the associate director of social media at Boston agency Connelly Partners, but he’s still paying down those loans. Luckily for him, his agency recently started supplementing his regular student loan payments, by making a monthly contribution toward the principal.
Move over ping-pong tables and free lunches. The latest agency perk geared at millennials is actually a practical one, helping them keep a tight rein on their finances. Agencies including Connelly Partners and 360i are setting up programs to help their employees repay their student loans.
In doing so, agencies join the ranks of a small but growing number of companies, including financial-services firm Fidelity and consulting and tax advisory firm PwC, that have set up such initiatives for their staffers. By partnering with companies that give borrowers a way to consolidate student loans and pay lower interest rates — such as Gradifi, SoFi and Tuition.io — these agencies are offering to help their employees with student-loan refinancing and even making contributions to their payments. It’s smart business, too: In an industry mired in a talent crunch, programs like this help foster loyalty.
“One of the things you have to do when you’re running an agency of young people is be empathetic to their problems and stresses,” said Steve Connelly, president at Connelly Partners. “Most of these kids cannot even start thinking about their future because they’re so saddled by their college debts.”
Similar to a 401(k) plan, employees that enroll in the debt-relief plan take a certain amount out of each paycheck and Connelly Partners adds its own contribution to the principal to help pay the loans down faster. Through its contributions, the agency is aiming to pay up to $10,000 of student loans per employee, potentially shaving three or more years off of a 10-year loan. Connelly Partners’ program is being administered by Gradifi.
Student-loan debt has skyrocketed in recent years, with the average class of 2015 graduate having to pay back more than $35,000, according to government data analysis by Mark Kantrowitz, publisher at Edvisors. A full 86 percent of millennials also say that they’re stressed, according to the Cassandra Report, with the top two sources of their stress being not having enough money to live on and paying off debt.
“The basic idea is that a lot of people are overpaying on their student loans today,” said Catesby Perrin, head of business development at SoFi. “But the reality is that you’re a very different credit risk as a graduate than what you were as a 17-year-old. SoFi can help young workers refinance their loans and reduce their interest rates.”
While SoFi does have an employer-contribution model similar to Gradifi’s, its agency partners, including 360i, have so far signed on to offer staffers student-loan refinancing as a benefit, said Perrin. Both SoFi and Tuition.io are actively pitching to a range of other agencies. 360i just held an information session about its student loan refinancing plan with Sofi yesterday, incorporating it within its other wellness initiatives that include, among other things, yoga retreats.
“We’ve identified this as something that is important to a huge chunk of our employees and reacted to it,” said Geline Midouin, chief talent officer at 360i. “So we’ve expanded the definition of wellness to include, among other things, financial wellness too.”
With millennials set to make up over 75 percent of the workforce by 2025, it’s in the interest of employers to cater to their needs. Such programs help agencies differentiate in the competition for talent, serving as draws for recruitment and retention. For instance, in addition to offering a monthly contribution, Connelly Partners is also setting aside $1,000 toward each new employee’s educational debt, almost like a signing bonus.
“For the first time, young people are telling us that they would rather work at companies that emphasize financial rewards than those that are making a difference in the world,” said Rachel Saunders, director of the Cassandra Report. “As millennials become a larger part of the workforce, a company’s future success will rest in its ability to attract and retain young talent through an updated reward system that accounts for this newfound focus on financial security.”