Employers Chop Down College Loans
Edward Cash would really rather spend his hard-earned paychecks from the Memphis Police Department on his daughter than on humdrum necessities like student loans, replacing a broken-down car, or saving.
“I need money, as much money as I can to take care of this new human in my life,” Cash said about 4-year-old Kirby.
Of course, he and his wife, Ashley Cash, a Memphis city planner, pay their bills, in between doting on Kirby. But college loans are different: they get help. The city government pays down $50 a month on each of their loan balances – as it does for some 600 employees.
In May, Memphis joined Fortune 500 companies in the vanguard of employers offering this benefit. The city’s police force requires some college education, and though it’s not required in the fire department, college is not uncommon.
With college debt exceeding $1.4 trillion nationwide, help with student loans appeals to young employees, who say in surveys that paying them off is their No. 1 financial priority. Recognizing this, major employers are using the tuition benefit to recruit talent, including Fidelity Investments, Live Nation, Natixis Global Asset Management, Pricewaterhouse Coopers, and Staples Inc., according to company and media reports.
“I’m proud we’re the first public entity in offering this,” said Memphis’ head of human resources, Alex Smith.
Scott Thompson, chief executive of Tuition.io, which manages Memphis’ service and is a leader in the field, noted that the unemployment rate for college graduates is 2 percent – half the rate for the population overall. “Employers are saying, ‘We have to work really hard to get this person to work for us, and we want them to stay.’ ”
Cash thinks the benefit is worth staying on with the city for, especially after learning how difficult it was to make a dent in his $20,000-plus loan balance. The interest alone is about $70 per month, but even when he was repaying $200, the balance was “going down very very slow.”
After nine years and several promotions in the police department, Cash runs the police body-camera unit and can now put $320 a month toward his loans. Add the city’s $50 contributions, and he’ll see real progress. Ashley spends another $300 – $350 with the city’s contribution to pay down her loans.
“It might not be at a breakneck pace, but you can pay off the loan that much faster,” Edward Cash said.
College debt-payment is offered by only about 4 percent of U.S. employers, according to the Society for Human Resource Management. But in two years, Tuition.io has gone from zero to an expected 100 clients by the end of 2017, CEO Thompson said. Employers contribute between $50 and $500 a month to pay down loan principal, he said. The highest payments are typically for doctors and other professionals.
The way Tuition.io’s program works is that borrowers, via Tuition, log into their federal and private loan accounts, giving the start-up company future access so it can make payments on employees’ behalf. The city reminds workers each month that a payment is going out and sends the money to Tuition.io.
Thompon said Tuition.io gets calls from employees who, despite their employer’s contribution, say, “‘I’m going to be paying this for 15 years?! That’s not right.’
“We say you are going to be paying it for 15 years if you pay the minimum,” he added.
The great thing about these programs is that they make it easier to exceed the minimum.
A correction was made to this blog about how Tuition.io processes loan payments.
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