With the price of a college education continuing to skyrocket, student debt is a major issue for many nowadays. Given record low unemployment rates and a very worker-friendly job market, many employers are looking for creative ways to set themselves apart from the competition in order to attract top talent. One innovative approach involves allowing employees to “cash in” unused PTO time and use the money to help pay down student loans.
Employers have been taking steps to address student loan burden for a while now. Some companies provide voluntary repayment benefits to assist students with debt payment; other strategies include making direct employer-matching contributions toward the loan amount or working with low-interest rate lenders who can offer competitive financing rates and bundling packages. Benefits such as these are especially attractive to younger workers, not surprising given the fact that student debt now exceeds $1.5 trillion, according to the Federal Reserve. When employees are on the hook for making these monthly payments, they often have little income left to contribute to 401(k) and other savings plans. That’s persuaded companies like Unum and Abbott Laboratories to come up with some creative solutions.
Employees at Unum receive 28 days of PTO beginning in their first year. They are allowed to carry over a maximum of five days (40 hours) every year, and beginning in January 2020, will be able to convert their unused time into a student debt payment plan.
Abbott Labs unveiled a new program geared toward employees who contribute at least 2 percent of their pay to student loans through payroll deduction. The company will provide an automatic 401(k) payment equivalent to 5 percent of the employee’s salary to these workers even if they aren’t contributing to a 401(k) account themselves. The amount is equivalent to that offered through their employer matching program.
The IRS is still ironing out the details of Abbott’s plan but has initially approved it through a private letter ruling. This paves the way for other companies to come up with similar creative approaches to tackling the student debt issue.
Younger employees aren’t the only ones burdened with student debt. Older workers might have taken out loans to pay for their children’s college educations or returned to school themselves to improve their future job prospects. Regardless, student debt remains a major problem for many U.S. employees. When employers can help ease the burden, everybody benefits.