Finance chiefs everywhere will want to keep a very close eye on the growing popularity of student loan repayment benefits.
The City of Memphis just announced a citywide program called the Student Loan Reduction Program, a program created specifically to help employees with their student loan debts.
With the program, which is being administered for the city by Tuition.io,, Memphis becomes the first U.S. city to offer student loan repayment benefits for employees.
‘Effectively compete for talent’
Beginning on July 1, eligible Memphis city workers (active, full-time employees of the city for at least 12 months) will receive monthly contributions of $50.
Memphis’ chief HR officer, Alex Smith, cited Memphis’ higher than average student debt levels as at least part of the reason for the move. A report from the Federal Reserve Bank of St. Louis found that student debt levels in Memphis increased 5% in 2015, compared to 3% nationally. Memphis residents have average student balances of $31,000.
Additionally, Smith said the move:
“… provides us with a unique opportunity to offer a competitive benefit to our employees – a benefit that no other municipality is currently offering. We see this as a great opportunity to attract and retain top talent for the city of Memphis and effectively compete for talent.”
The student loan repayment benefits are expected to help 14% of Memphis’ approximately 840 employees.
While Memphis is the first city to roll out student loan repayment benefits, a small and growing segment of large corporations in the private sector already have this perk in place. These firms include Aetna, Staples and Penguin Random House. Research by Willis Towers Watson estimates that 20% of firms could offer student loan benefits by 2018 (currently just 4% of firms do).
A similar story
As Resourceful Finance Pro has covered previously, there are plenty of reasons to believe student loan repayment benefits could become like the next 401(k) for employers — something that must be offered in order to attract and retain top talent.
Reason for the parallel: When 401(k)s officially launched back in 1982, many employers and business groups believed the benefit wouldn’t last. By 1983, the retirement plan design had exploded among employers.
And the triggers for that explosion are very similar to those surrounding student loan repayment benefits: The government had a vested interest in addressing individuals lack of retirement preparedness and introduced bipartisan legislation to do just that.
The same can be said of the current student loan debt crisis. Helping individuals with student loan debt is a pro-consumer, pro-business objective. Plus, it’s one of the rare political issues that has bipartisan support.
In fact, there are several bills pending right now aimed at tackling student loan debt, such as:
- H.R. 1713 – Student Loan Repayment Assistance Act
- H.R. 3861 – Employer Participation in Student Loan Assistance Act, and
- S. 2457 – Employer Participation in Repayment Act.
A version of this story initially appeared on our sister website, HR Morning.