Recently there has been uptick of news articles talking about companies offering student loan repayment programs, similar to how companies provide you with healthcare and retirement benefits, or even tuition reimbursement for continuing your education. I think that it’s great that companies are realizing that many people see student loan repayment as a priority and incentivizing people to come work for that company by offering more perks. It’s refreshing to see in this time period when the strategy for many companies seems to be to offload as many of these costs onto the employees, instead of increasing the benefits for employees. Even though these benefits may not go directly into your pocket or checking account, they are in fact little raises. Every dollar that you receive in benefits is a dollar that you don’t have to spend out of your paycheck for that item. But are these plans really that effective? I’m going to analyze one of these student loan repayment plans to see just that.
I’m going to use information directly from the details of this tuition assistance program and then try to give you a break down along with my opinion on the program itself. The first part is the introduction of the plan:
• “Natixis Global Asset Management will give employees up to $10,000 over their career to put toward their student debt”
This sounds great as $10,000 is a significant contribution and even if this is spread out over 5+ years, it’s still going to help make a dent in those student loans.
• “At Natixis, workers have to be at the company for five years to qualify for any student loan reimbursement”
Well I guess this is OK, most companies do have a vesting schedule for their 401k and pension plans if they do have one. Five years are definitely at the max range of any vesting schedule and this isn’t really a gradual vesting schedule there. If you quit before your sixth year, you don’t really get anything. And many students may have already made significant progress on their loans within five years. I’m also not sure of how competitive the salary/raises are at Natixis but in many situations the only way to get a significant raise is to find a new job. If you remain stagnant for five years, the salary increase from switching companies would have been a lot more than a $10,000 student loan payment. Even a $5,000 increase in salary for 3 years is a $15,000 increase and possibly more. It seems like most people who have been at the company for five years probably won’t have student loans, and many new graduates may not even remain with the company in five years.
• “At that (five-year) point they get $5,000 to put toward their debt and then can qualify for another $1,000 a year for the next five years they stay on after that.”
Essentially you have to stay at the company for 10 years to take full advantage of this program, and being that most student loan repayments are over the course of 10 years you would need to work here the moment from graduation to take full advantage of the program. It’s nice that they offer the $5,000 lump sum in the sixth year but that is still a long period of time in today’s workforce. Most millennials only expect to be at a job for around 3 years, and even from my anecdotal experience that seems to be true.
Now I don’t mean to make this a personal attack against this company and their policies, and I do believe it’s a step in the right direction. They are bringing awareness The point of this post is that I just feel that the restrictions placed around this program in particular make it not applicable to 90% of the people working there, and more of a PR move. It’s always important to “read the fine print” and realize what exactly you are getting into. Don’t take a job because the benefits sound good, make sure they are good fit for what is important to you and that you will be able to take advantage of. That is the point of employee benefits!
And there is a counter examples of a student loan repayment program where a large percentage of new hires can take advantage:
• PricewaterhouseCoopers pays $1,200 a year for up to six years toward their student debt. The benefit is available to those with associate and senior associate titles. These are entry-level positions that make up 45 percent of PwC’s 46,000-person U.S. workforce. To qualify for help, employees don’t have to work at PwC for a minimum number of years, and they won’t have to pay it back if they leave after a certain amount of time has passed.
As you can see, the plan being offered by PwC addresses all my concerns about the plan that Natixis is offering. You are allowed to take advantage of the program right away and it’s specifically designed for entry-level positions. These are the people who in need of help the most. There is also no penalty if you leave company which is a huge plus, even most tuition remission programs require to you to pay back a certain amount if you leave within X months/years.
I know that I also have to realize that PwC is a massive company that can use benefits like these to attract the top talent, while Natixis is a company that only has 500 employees and may not be able to absorb the costs of a program like this if they received a flood of new talent. There’s also the fact that most companies do place a vesting schedule on 401ks, pensions, and tuition reimbursement. So a time limit or restrictions on an employee benefit program is not unheard of and fairly common these days. I just like that the PwC program is so direct and should be able to help a larger portion of recent college graduates as well as current employees.
What’s your opinion on these sort of programs? Do you feel that it’s more fluff and trying to build goodwill instead of actually doing good? Or are you of the opinion that something is better than nothing?
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