With quarantining and working from home the continuing reality for the foreseeable future, fewer employees are taking advantage of PTO. Rather than let all of that unused time disappear into the void, one innovative solution is to convert the cash value of unused PTO toward employee student loan payments.
Insurance provider Unum is already using this approach through a partnership with Fidelity Investments. Unum employees are able to transfer up to 40 hours of PTO to help pay down their student loans.
“Student loan debt has tripled over the past decade, and studies suggest that rising debt is hurting employees’ focus at work, their overall well-being and their retirement planning,” says Carl Gagnon, Unum’s assistant vice president of global financial well-being and retirement programs.
Gagnon says around 30% of Unum’s workforce carries student loan debt, adding to the challenge of contributing to other savings goals. The program with Fidelity has been in place for a year, and so far, Unum has seen positive results.
“Unum knew that student debt was impacting their employee population, but they also were looking for ways to creatively fund it,” says Asha Srikantiah, the head of Fidelity’s student loan program. “Unum has a pretty generous paid time off program as it stands and what they were seeing that they had many people who were in fact leaving paid time off days on the table.”
Even before the pandemic, U.S. employees only took about half (54%) of their eligible time off, according to a survey by Glassdoor. That unused vacation time carries $224 billion in liabilities for employers, according to a study by Oxford Economics.
Unum has so far paid $528,000 in student debt on behalf of the 428 employees who have signed up for the program. That breaks down to $1,250 per person for 37 hours of unused PTO.
“Payments ranged from $130 to $6,000 with an average around $1,250 per employee,” Gagnon says. “Employees across four generations participated in the program to help pay off loans for themselves or loans they co-signed for their children.”
With the average student loan debt a staggering $1.6 trillion in the U.S., employers have been tasked with finding solutions. Other employers, including Montefiore St. Luke’s Cornwall Hospital teamed up with Tuition.io in 2019 to offer its employees a PTO exchange benefit. MSLC offers all non-union workers the opportunity to convert 30 to 75 hours of unused PTO into a payment against student debt, which will be distributed semi-annually with a maximum of $5,000 in yearly contributions.
“The nice part of this benefit is that the employer has already accrued this expense for the PTO,” Scott Thompson, CEO of Tuition.io, told Employee Benefit News last year. “This is not a new expense that they’re generating on behalf of employees. ”
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As the economic hardships brought on by the coronavirus pandemic continue to worsen in the U.S., employers need to be cognizant of the role financial wellness benefits like student loan repayments can play in improving employee’s lives and creating a more loyal and productive workforce.
“Debt is one of the biggest drivers of stress, anxiety, and other other forms of making people feel unwell,” Srikantiah says. “When people pay off their debt, they actually feel much better as a whole in terms of the picture of their own life.”
