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Employers offer new benefit: help paying off student debts

CPA James Metzler, 27, seen here on Tuesday,

CPA James Metzler, 27, seen here on Tuesday, April 18, 2017, works in PricewaterhouseCoopers' Melville office, and graduated with $36,000 in student debt. He estimates that the $100 a month that his employer pays toward his student loan will shave about two years off his payments. Photo Credit: Barry Sloan

Companies with operations on Long Island are starting to offer a benefit of keen interest to millennials: helping them pay off their student loans.

In the last year, accounting company PricewaterhouseCoopers LLP, mutual fund giant Fidelity Investments and office supply retailer Staples Inc. have begun paying $100 a month or more directly to qualifying employees’ student loan accounts. The companies cap the lifetime benefit at $3,600 to $10,000.

St. Francis Hospital in Roslyn started offering the benefit even earlier. It pays nurses working the night shift up to $500 a month to pay off student loans, with no lifetime cap. It has offered the benefit since about 2003.

Experts say the companies benefit as well as the employees. “Many employers now believe that providing student loan benefits would further strengthen the psychological contract between them and their employees,” said Janet Lenaghan, vice dean of Hofstra University’s Frank G. Zarb School of Business and a professor of management.

New Hyde Park-based health system Northwell Health, and CA Technologies, the Manhattan software company with historical roots on Long Island, currently or soon plan to help employees refinance their student debt at lower interest rates.

To millennials — which Pew Research Center defines as those born 1981 to 1997 — the benefit offers help with a heavy financial burden that is hitting their generation hard.

Nationwide, student loan debt ballooned to $1.3 trillion in 2016, up 170 percent from 2006, the Federal Reserve Bank of New York said in April.

The average student loan balance on Long Island climbed 69 percent to $33,900 between the fourth quarter of 2005 and 2015, according to research by the New York Fed Consumer Credit Panel and Equifax, the credit-reporting agency.

“The young people today through no fault of their own are coming out [of college] loaded with debt, and they are facing pay paralysis on the job,” said economist Gregory DeFreitas, who heads Hofstra University’s labor-studies program.

And for companies, help with loans offers a way to compete for young, well-educated workers.

“We’ve heard great feedback from our employees about the program, and our recruiters have told us that the program is proving especially attractive to potential candidates,” said Jennifer Hanson, Fidelity’s head of employee experience.

Federal and state programs have long granted loan forgiveness to college graduates who meet certain criteria. For example, under the Teacher Loan Forgiveness program, teachers who work full time in low-income areas for five years could qualify to have up to $17,500 erased from their federal student loan debt.

New York State’s Young Farmers Loan Forgiveness Incentive Program forgives up to $50,000 in student loans to college graduates who are residents and operate a farm full time for at least five years.

What’s new is that private employers are starting to find value in offering the benefit, to attract and retain workers, experts said.

Interest is growing from a small base.

In 2015, when the Society for Human Resource Management, an Alexandria, Virginia-based trade group, first included a question about paying off student debt in its annual benefits survey, 3 percent of employers offered it. In 2016 the percentage rose to 4 percent.

Gradifi Inc., a Boston startup that manages student-loan debt benefits for companies, said it has signed up 20 clients in the past month. And it has gotten more than 1,000 inquiries since it began managing the benefit for companies in January 2016, said chief marketing officer Meera Oliva. She declined to say how many clients the company has.

The benefits are most popular in industries that hire young graduates with high college debt in professions such as medicine, law, teaching and technology, Oliva said. Gradifi applies the payments from companies directly to the principal of the employees’ student loans.

“They serve to get the employee out of debt faster, and they also reduce the total cost of the loan over time,” Oliva said.

Other companies that offer the debt-paydown benefit include New York publisher Penguin Random House, Boston ad agency Connelly Partners and First Republic Bank, based in San Francisco. First Republic recently bought Gradifi.

PricewaterhouseCoopers, a Gradifi client, said it began offering the benefit in July 2016.

It pays $100 month toward student debts, and the assistance maxes out at $7,200, said Michael Fenlon, chief people officer at the Manhattan-based company. Currently, 8,200 employees have signed up for the benefit, he said.

The program is available to associates or senior associates from the day they start. And the company doesn’t impose payback penalties if an employee quits.

“Our people, and students across the U.S., were telling us that student debt is an enormous concern,” Fenlon said. “It helps our employees, and we’re also addressing a major societal problem.”

CPA James Metzler, 27, who joined PricewaterhouseCoopers’ Melville office in November 2015, began receiving the benefit when it debuted at the company. Metzler, whose title is experienced associate, graduated with $36,000 in student debt from SUNY Oneonta in 2013, after a five-year accounting program. He estimates that the $100 a month from his employer will shave about two years off his student loan payments, coupled with the $400 a month he continues to pay.

“It’s very helpful,” Metzler said, “Most people are starting to realize that student loan debt is crippling my generation.”

Staples, based in Framingham, Massachusetts, announced in November that it was offering the benefit, which will pay $100 a month for up to 36 months and initially will be available to sales associates identified as “high potential and top performers.” The company declined to say how many workers are in the program.

Fidelity, which is based in Boston, announced its program in March 2016. It pays employees with more than six months on the job $2,000 a year toward their student loans, up to a maximum of $10,000. About 6,000 employees have enrolled, the company said.

Helping pay off college debts can be a powerful attraction to millennial workers.

A survey by American Student Assistance, a Boston-based student-advisory company, found that 86 percent of young workers would commit to a company for at least five years if it helped them pay off their student loans. The survey polled 502 workers who ranged in age from 22 to 33 and 451 human- resources managers at companies with at least 100 employees.

Ann Cella, St. Francis’ senior vice president of patient care services/chief nursing officer, said she started the hospital’s program to help recruit and retain nurses who work nights.

The hospital’s “loan forgiveness program” has no lifetime cap, pays as much as $500 a month and up to $6,000 every year toward the student debt of full-time nurses with four-year degrees who work the night shift, Cella said. The program typically has 60 to 80 participants each year, she said.

The program has helped the hospital’s retention efforts, Cella said.

“The benefit to the institution is that I have slowed down turnover of nurses on the night shift,” Cella said. “The stability that it offers the night shift in a health care organization is very valuable.”

Christine Van Houten, a St. Francis registered nurse who graduated in 2014 with close to $80,000 in student loan debt after two years at Queens College and four at Molloy College in Rockville Centre, started receiving the benefit in 2015, six months after she began working at the hospital.

“It’s a huge help,” she said. “It was one of the reasons I decided to work nights,” said the 34-year-old Floral Park resident.

CA Technologies, which has more than 1,000 people in its in Islandia office, this year began providing a benefit that allows employees to refinance their student debt at lower interest rates. The company pays a $300 “welcome bonus” when the worker applies for the assistance.

Northwell Health, the largest private-sector employer in the state, said it plans to roll out a similar plan soon. Northwell and CA have hired SoFI, a San Francisco-based online lender and personal finance company, to administer the program.

Experts said paying off student loans links the interests of young workers and companies. “It is crucial that employers do whatever they can to lure the best-qualified young people and to pay them well and help with this burden,” economist DeFreitas said.

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