After graduating from college, Augie Kennady was saddled with nearly $90,000 in student loan debt.
If he stuck to his loan servicer’s payment plan, he’d be shelling out the equivalent of a high car payment every month for 25 years. But after joining educational services company Chegg in 2015 as a customer service representative, Kennady started participating in the Santa Clara, Calif., company’s student loan repayment program.
This employee benefit — which is offered by a small but growing number of companies — meant that Chegg contributed $23,000 toward the principal of Kennady’s loan, allowing him to knock off valuable time from his repayments. With that help, Kennady redirected some of his income toward a down payment for a house, and it made him feel more loyal to the company.
“It definitely affected my decision not to leave,” said Kennady, now Chegg’s director of trust and safety. “When you’re free from student debt, that gives you the opportunity to do other things to improve your life that you can’t necessarily do when you’re trapped under that burden.”
Now that the U.S. Supreme Court has ruled against President Biden’s plan to forgive millions of student loans, employer interest in this benefit is starting to heat up, especially as the number of open jobs continues to outnumber workers. On Friday, the U.S. Department of Education said it would cancel $39 billion of federal student loans for a smaller subset of borrowers who were enrolled in loan repayment plans based on their income.
“If a lot of people had their debt forgiven, this benefit wouldn’t have been as attractive,” said Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute, a nonprofit research organization. “It’s going to be attractive to far more employees now because they still have the debt. It will give [employers] that potential competitive advantage.”
As of 2022, U.S. borrowers owed a total of $1.75 trillion in student loan debt, a number that has been steadily increasing over the last five years, according to the Federal Reserve.
Today, 21% of those who once attended college still owe money on their student loans, with the median debt between $20,000 and $24,999. An additional 21% of college attendees borrowed money but fully paid off their loans, according to the Fed.
Although staffers on Capitol Hill have long been eligible for a congressional student loan repayment program, private employers only recently began offering this benefit. As early as 2015, a modest 3% of companies said they had this benefit, according to an annual employee benefits survey by the Society for Human Resource Management trade group of its U.S. members.
Domenic Locapo’s company started offering student loan repayment in 2016. At the time, Locapo had about $6,000 left to pay on the $40,000 worth of student loans he took out to pay tuition at Boston College.
His company, then known as Kronos, paid $500 a year toward the loan’s principal. He ended up paying off the loan three years early, in the fall of 2020.
“That’s extra money back in my pocket,” said Locapo, now 41, who serves as senior director of global public relations at HR software maker UKG, which became the company name after the 2020 merger between Kronos and Ultimate Software. “Now I have two young children, so any extra savings we have … we just funnel back to our kids and their futures.”
Santa Clara tech giant Nvidia started offering a student loan repayment program in 2017 after new hires who had recently graduated from college expressed concerns about the cost of student loans and the general cost of living, said Beau Davidson, vice president of employee engagement.
Today, the program offers U.S. employees $350 a month, paid directly to their loan servicer, with a lifetime cap of $30,000 per worker. About 1.2% of the company’s workforce participates in the program, which employees are eligible for from their first day on the job. Most are recent college graduates, but the program has no age limit and could be applied to loans for advanced degrees.
“That was really helpful in terms of two fronts — helping existing college grads and helping us from a recruiting standpoint,” Davidson said. “Particularly in making sure that employees know right off the get-go that we’re really interested in their long-term success.”
Mathias Caetano paid off his student loans four years early through Nvidia’s student loan repayment benefit.
The San Francisco resident joined Nvidia in 2013, just weeks after graduating from the School of the Art Institute of Chicago with about $28,000 in student loan debt. He signed up for the company’s student loan repayment program when it launched in 2016, and it helped him pay off his loans in three years.
He’s since become “somewhat of an ambassador” for the company’s student loan repayment benefit to recent college graduates joining the tech company.
“It just accelerated my personal finances in a way that allowed me to focus on just taking care of this,” said Caetano, now 32, and a senior art director at the company. “There was definitely that feeling … that you’re cared for, that the company is caring for you.”
New York Life Insurance Co. introduced its student loan repayment program in 2017 and now contributes $170 a month toward an employee’s student debt for up to five years, which adds up to a maximum of $10,200 a person.
The company has so far contributed more than $11 million, with more than 2,000 employees enrolled in the program since it began. More than 170 employees have paid off their loans, New York Life said.
Interest in offering student loan repayment as a benefit surged in 2019, as employers looked to gain an edge in a competitive labor market. That year, 8% of employers surveyed said they offered student loan repayment to their employees, up from 4% the previous year, according to survey data from the Society for Human Resource Management.
Even online brokerage E-Trade Financial got in on the action, acquiring student loan benefit firm Gradifi in 2019. (E-Trade was then acquired by Morgan Stanley in 2020.)
“Everyone thought [the] student loan benefit was really going to take off,” Copeland said.
Once the pandemic hit, momentum slowed. People were getting laid off, hours got cut and pay scaled back. Employers and employees focused instead on emergency savings, Copeland said.
Interest ticked back up after then-President Trump signed a federal COVID-19 relief bill that included a provision allowing employer-provided student loan repayment or other educational expenses up to $5,250 a year to be considered a tax-free benefit through 2025.
Manhattan Beach company Highway Benefits has seen the oscillating levels of interest throughout its 2 ½ years of existence. Founded in 2021, the company helps businesses offer student loan repayment as a benefit and provides the software platform and verification needed to move funds directly from employers to the loan servicer.
“It’s shifted from ‘Yes, we have an interest, we’d like to learn about this,’ to ‘OK, how do we actually implement this?’” said Mick MacLaverty, Highway Benefits’ chief executive. “It’s been a little bit out of sight, out of mind for employees. But now that loans are resuming, student loan forgiveness via the Supreme Court did not go through, companies are looking for unique ways to attract and retain talent.”
Student loan repayment options include matching contributions, direct payment as in the Nvidia and New York Life plans, in which companies contribute a set amount of funds per period to an employee’s loan, and programs that combine 401(k) contributions with student loan payments.
But the practice has also raised questions of fairness. Not every worker has student loans, and some employees will not get to reap the benefits, said Sandy Baum, a senior fellow and a higher education economist at the Urban Institute think tank.
Having a program like this is also much cheaper for employers because they can say they offer this benefit, but only have to pay it out to a fraction of their employees, she said.
Some companies such as UKG have evolved their student loan repayment programs to be more flexible and address some of these critiques. Instead of earmarking funds specifically for student loan repayment, the company reimburses the employee $350 a quarter for 100 different personal needs, including student loan repayment.
For Locapo, the UKG spokesman who paid off his loans three years ago, that means he can put those funds toward his children’s sports activities.
Other companies have taken the approach that not every benefit will be useful to every employee.
“We have lots of programs as a company that benefit some and don’t benefit others,” said Davidson of Nvidia. “The folks who participate in this program have the same opportunity for salary advancement as the folks who don’t participate in this program.”
Some companies have also used their participation as a way to signal their culture and values.
Google launched its student loan repayment benefit in 2021 and said the program was part of the tech giant’s commitment to racial equity, as student loan debt disproportionately affects women and people of color.
Google matches up to $2,500 a year in payments toward the loan’s principal.
Connelly Partners ad agency, for example, said its student loan repayment program takes 10 years off the typical student loan in five years. The Boston company started its repayment benefit seven years ago after noticing that younger employees weren’t participating in its 401(k) program. Since then, Connelly Partners has contributed nearly $338,000 to the program, and 75% of eligible employees participate in the benefit.
“It was a great culture statement,” Connelly said. “We understood the stress young people are under with student loans. Our philosophical approach was, ‘OK. Well, let’s help you get out of debt, so I can get you to saving for retirement.’”
