Carvana rolls out student loan repayment perk

With the average student loan tab running upward of $40,000, many employees fresh out of college are mired in debt and looking to employers for help.

Employers are increasingly stepping up to the challenge by offering ways to help their workers repay their student loan debt. It’s an incentive that can lure new talent and help workers build their nest egg. Carvana, an e-commerce platform for buying used cars, is the latest company to step into the game by implementing a new student debt repayment benefit.

Carvana will contribute up to $1,000 per year for its more than 1,800 employees to pay down the student loan debt of its full-time employees through Gradifi’s SLP Plan benefit.

“In today’s tight labor market, it is essential for employers competing for top talent to differentiate themselves, and student loan benefits allow them to do just that,” says Meera Oliva, Gradifi’s CMO.

A student loan repayment benefit can reduce the high cost of employee turnover and is a clear differentiator in recruiting talented employees, Oliva adds. “Organizations that help employees minimize student loan debt position themselves as an employer of choice in today’s highly competitive job market.”

Employers including Aetna, brokerage firm Crystal & Company and Estée Lauder Companies are now offering about $10,000 in lifetime contributions to each employees’ student loan. The monthly stipend is applied to the principal on the loan, which helps the employee pay off the loan faster and save on interest.

Companies that can’t offer student loan reimbursement payments often opt for other related benefits, such as consolidation programs and refinancing arrangements, according to a 2018 survey from Willis Towers Watson.

The consulting firm anticipates 34% of employers will offer student loan consolidation programs by 2021, up from 8% in 2018, and 35% of employers will offer student loan refinancing arrangements by 2021, up from 10% in 2018.

Student loan repayment programs are part of the larger approach employers are taking to increase financial wellness and retirement readiness in their workforce.

Young people with student loan debt do not contribute to their 401(k) at the same rate as people who are debt-free, Gradifi’s Oliva adds. Student loan programs address an immediate and pressing financial concern, she says, allowing employees to put their student debt behind them sooner so they can move on to other financial milestones like saving for a house or for retirement.