One employer is presenting a unique solution to help its employees pay off their student debt: allowing workers to trade in paid time off for a payment toward their loans.
Montefiore St. Luke’s Cornwall, a not-for-profit community hospital with campuses in Newburgh and Cornwall, N.Y., rolled out the new benefit at the beginning of the year, but just publicly announced it.
Through the new program with student-loan benefit provider Tuition.io, MSLC’s 2,000 employees can transfer their unused paid time off to the repayment of their student debt, including federal and Parent PLUS loans. Eligible employees can convert 30 to 75 hours of unused PTO into payment against student debt, which will be distributed semi-annually, with a maximum of $5,000 annual contribution, the company says. The program is now available to non-union, full-time and part-time employees, and the hospital says it soon plans to expand the initiative to include unionized employees.
The program already has garnered positive feedback and results, says Dan Bengyak, MSLC’s vice president of administrative services, especially because those working in the medical field are especially saddled with debt. More than 50 participants so far have signed up for the program, and nearly $90,000 has been paid out in the first window this year.
“Medical graduates are often faced with what can seem like an insurmountable amount of debt as they transition from student to medical professional,” he says, adding that the program is “at the forefront of employee benefits and squarely addresses the very real challenges faced by thousands of workers.”
National student-loan debt currently stands at $1.5 trillion, according to the Federal Reserve, but medical students bear a larger-than-average financial burden after graduation. Three-quarters of medical students leave school with education debt, holding an average balance of $196,000.
While student-debt benefits are rising in popularity–8% of employers now offer a student-debt benefit, up from 4% last year, according to the Society for Human Resource Management–pairing such a benefit with time-off benefits is much more rare.
“In addition to making meaningful payments against an employee’s student debt, this type of plan has the advantage of not generating an additional expense to the employer, as they have already accrued the expense in their prior period’s financial statements,” says Tuition.io CEO Scott Thompson. “For a majority of employees, receiving a $5,000 contribution to their student-loan debt is monumental–potentially cutting interest and duration in half. It’s a truly life-changing impact.”
Unum earlier this year announced a similar benefit tying paid time off to student-loan payment; it will go into effect Jan. 1. Employees of the insurance company can transfer up to five days, or 40 hours, of carry-over paid time off into a payment against student debt through a new program managed by Fidelity Investments.
Though having employees decide between taking a vacation or paying off loans may seem like a difficult option to present, most workers leave vacation time on the table. Last year alone, American workers gave up about $62.2 billion in lost benefits by forfeiting more than 200 million vacation days that could not be rolled over, according to Project: Time Off, which is sponsored by the U.S. Travel Association.
“Personalized benefits is where the industry is heading, and this is a proactive step toward alleviating the stress of student-loan debt,” Thompson says.
In general, an increasing number of employers are setting their sights on helping employees face an exorbitant amount of debt. Employers including Aetna, Sotheby’s, Estée Lauder and Staples offer contributions to workers’ principal debt amounts; others including Fiat Chrysler provide a student-loan-refinancing benefit, which allows employees to replace existing loans with a new loan at a lower interest rate.
“As the percentage of the U.S. workforce with student-loan debt continues to expand, a growing number of employers are realizing they must offer their employees student-loan-repayment benefits to attract and retain the talent they require to be successful,” Thompson says. “As a result, these employers are getting creative in designing unique plans to help offset this massive financial burden for their employees.”