A new partnership between CommonBond and Ayco is helping reduce the burden of student loan debt for millions of employees.
The financial technology company offering a student-loan solutions is working with the Goldman Sachs company, which offers financial counseling services, to provide the new benefit.
“When you consider the purpose of employee benefits, it's always been to help people with things that are relevant to their lives,” says Tara Fung, chief commercial officer at CommonBond. “If we're going to require education and certifications, there's a responsibility to help our employees pay back their loans. There's a lot of benefits associated with employees not worrying about their finances.”
Cumulative student loan debt reached $1.4 trillion in 2019, with the average American leaving college with $37,000 in student loans, according to the Department of Education. The financial stress of the debt burden is forcing employees to prioritize loan repayment over all other savings goals, says David Klein, CEO and cofounder of CommonBond.
“We know that student loan debt can delay other major life decisions like owning a home or buying a car, and half of our millennial generation thinks of paying for student loans first before retirement,” Klein says. “Companies are becoming aware that their workforce is thinking more about student loans and they're caught flat-footed. They have retirement solutions for their employees but they don't have student loan solutions for their employees.”
Currently, just 4% of employers offer student loan repayment benefits, according to the Society for Human Resource Management. But employers who recognize the need for this benefit will have a competitive edge in retaining and attracting talent, says Klein.
“When we look at the data, we see that 70% of graduates have student debt and 80% of people with student loans will choose to work at a company that provides student loan assistance,” he says. “The data is compelling. The companies that respond to the data will attract and retain top talent. The companies that don't will be less competitive than other companies in the space.”
Over 100,000 employees currently have access to this partnership program, and CommonBond expects millions more to reap the benefits. Participants in Ayco's financial wellness benefit will have access to financial counseling and a student loan refinancing benefit, which can help employees lower their loan’s interest rates and monthly payments.
Additionally, CommonBond will facilitate loan repayments. Employers are contributing an average of $100 per pay period to loan repayment.
“This third piece allows employees to say, I want to go beyond helping employees help themselves,” Fung says.
Companies that offer 401(k) matching programs, but which have not allocated a budget to student loan assistance, can also have their match put toward an employee’s 401(k) if they are making payments on their loans, Fung says.
“Employers offer a retirement matching program, but in order to get the match, employees have to put money in — but they can't because their income is going to the loans,” she says. “Employers want to recognize student loans are financially stunting employees and recognize the payments as a way to make an employer match.”
Fung says the response to the benefit has been positive from both employers and employees.
“Employees feel their employer recognizes their need and sees that they’re working to be financially healthy.”
