PricewaterhouseCoopers in Baltimore offers a benefit that helps employees pay part of student loans each month for 72 months. (Barbara Haddock Taylor, Baltimore Sun video)
As an undergraduate at Bryant University in Rhode Island, Paul Taylor II studied accounting and played football on a scholarship. The Baltimore native also worked on and off campus, knowing he'd need to save money to start chipping away at a massive student loan.
After Taylor completed a master's program, also at Bryant, he started full time at PricewaterhouseCoopers in Baltimore in June. To his surprise, he found the job came with an unexpected but much-needed perk: student loan assistance.
"I know it's going to be a big part of my spending and how I plan my life for the next decade or more," said Taylor, 22, of the $400 monthly payment he expects to owe on about $40,000 in loans. "Any offer to help pay down loans is a great place to be."
With recent college graduates like Taylor starting their careers with debt loads averaging $30,000, some workplaces are trying to ease workers' financial burdens — and distinguish themselves as they vie to attract and retain top talent — by offering loan contribution benefits alongside health and retirement plans.
"Employers more and more are starting to understand the role they can play in building the financial wellness of an employee," by helping pay down student debt, said Catesby Perrin, head of business development for SoFi, a San Francisco-based lender that says it pioneered student loan refinancing and now helps employers offer loan contribution benefits as well.
"Retirement and health care … have been the two legs of the most common employer benefits," Perrin said. "That doesn't really reflect today's economic reality for the larger part of the workforce. Student debt has exploded into a crisis."
Student loan debt — estimated at nearly $1.3 trillion in the United States — has surpassed credit cards to become the second-largest category of household debt after home loans.
Still, relatively few private-sector employers offer loan assistance benefits.
Just 3 percent of employers surveyed last year by the Society of Human Resources said they offered the benefit, the first time it asked the question. That edged up to 4 percent this year, and the trade group said a growing number of employers plan to offer the benefit in the future while more are thinking about providing it.
The group is advocating for a change in the federal tax code to provide tax relief to employers that offer loan repayment help. Federal legislation has been proposed that would make contributions tax-free for workers.
Debt loads have risen along with tuition costs. Over the last three decades, the average cost of tuition, fees, room and board for all four-year institutions jumped nearly fivefold to $25,409 as of 2014-2015, according to the National Center for Education Statistics. When adjusted for constant 2014-2015 dollars, costs more than doubled.
Experts disagree about what's driving the increase, blaming reductions in state support for public colleges, rising spending by colleges and the increased availability of federal student aid, among other factors.
Millennial employees, who last year surpassed Generation X workers to make up the largest share of the U.S. workforce, are in worse financial shape than their older colleagues, according to a 2016 employee financial wellness survey conducted by PricewaterhouseCoopers.
More than three-quarters of millennial workers surveyed said their student loans have a moderate or significant impact on their ability to meet other financial goals. Sixty-five percent of workers of all ages with student loans found it difficult to pay for household expenses on time, compared with 35 percent of all other employees. Half of those with student loans said finances have been a distraction at work, compared with 23 percent of all other employees.
While relatively new in the private sector, student loan benefits have long been offered by federal agencies. In 2014, 33 agencies provided more than 8,400 employees with more than $58.7 million in repayment benefits, a 15 percent increase in the number of employees over 2013, according to a report by the federal Office of Personnel Management.
Most of those getting benefits worked for departments of Defense, Justice, State and Veterans Affairs, as well as the Securities and Exchange Commission. Plans vary by agency. The Pentagon offers plans as incentives for engineers and nurses, calling it a significant recruitment tool, according to the report. The Justice Department primarily offers plans for special agents and intelligence analysts.
"One of the most important priorities for Federal agencies is attracting and retaining well-qualified, high-performing employees," the report concluded. "Student loan repayments are a valuable human resources tool that enables agencies to recruit highly qualified candidates into Federal service and keep talented employees in the Federal workforce."
SoFi has been working with employers for about three years to offer student loan refinancing as a benefit. About six months ago, the company set up a new program allowing businesses to contribute toward student loans much as they do with 401(k) accounts. About 20 employers have signed on, and Perrin said he expects that number to at least double by 2017.
"We're seeing more and more step up to the plate and invest in their employees by contributing funds," said Perrin, adding that it's a logical next step as employers roll out new wellness benefits. "Student loans have become such a huge issue" for the millennial generation.
Perrin said contributions go directly to the loan servicer and run the gamut from $50 a month to as much as $50,000 a year that one employer of physicians contributes. SoFi offers $200 a month to its own employees. About $100 a month is typical, he said.
Kronos Inc., a Boston-area developer of workforce management software for companies such as Apple, Marriott and Nestle, prides itself on being a sought-after workplace.
Debt from student loans "was one of a few pain points we saw with our employees, not just younger ones, but employees in their 30s and 40s, who are drowning in this debt," said David Almeda, the company's chief people officer. "For someone who's just starting out, that's a big burden. We rolled out a bunch of new benefits last year and wanted to ensure we could offer some kind of relief."
When Kronos offered the benefit in the spring, more than 200 people signed up in the first 48 hours. The firm contributes $500 a year, spread over 12 months, toward loan principal through a direct payroll contribution. Three hundred people are now enrolled, and the company expects that number to grow to 1,000. All full-time workers are eligible, no matter how long they have worked for the company.
The cost to the company — an estimated $500,000 annually — is worth it, Almeda said.
"It just conveys the right message to people, that this is a partnership and we care about you," he said. "It helps us on a practical level from an attraction perspective. It differentiates us."
In PricewaterhouseCooper's student loan payback program, which started July 1, associates and senior associates receive $1,200 a year toward student loans for up to six years — or up to $7,200. The firm sees it as an enticement for the 11,000 workers hired off campuses as interns and in permanent jobs each year. The company signed up 8,000 of its permanent workers as of October.
Student debt "is a big problem for our society," said Rod Adams, who leads U.S. recruiting for PricewaterhouseCoopers. "We're hiring 11,000 new grads into the firm a year. This helps take one of the things they're stressed about off their plate. It frees them up to hit the ground running and be more productive."
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Taylor, who grew up in West Baltimore and graduated from Baltimore Polytechnic Institute, got a brief reprieve from payments on student debt while in graduate school. But he amassed yet more debt while there. And he watched recently graduated friends struggle to start making student loan payments. Many made it work by moving back in with their parents. He has done the same to try to save money.
"It's interesting how much it takes out of your pocket," Taylor said. "It's a big deal, especially to people in my generation graduating now with large debt coming out of college."
Taylor, who handles audits for business clients at PricewaterhouseCoopers, gets an email each month alerting him that his employer has made a payment to his loan servicer.
"It shows your employer honors your work and wants you to stick around," he said, "and understands what you're going through."