Free catered lunches, yoga classes and video games are nice. But with student loan debt weighing on millions of Americans, employer-funded repayment programs may be the next thing millennials look for in a job.
One startup helping companies offer the benefit is Chicago-based Peanut Butter, which runs a platform to help companies create, manage and track the impact of loan repayment plans. Companies pay a per-employee, per-month fee.
“When I was in college, all I could afford to eat was peanut butter sandwiches,” he said.
As a member company at Merchandise Mart-based tech hub 1871, Peanut Butter set its sights on helping other startups guide young entrepreneurs through student loan woes. The company plans to announce Wednesday that it is partnering with 1871 to connect the hub’s more than 350 member companies and alumni companies to its services.
Aronson said the inspiration for the business came from a 2014 research report from Aon Hewitt that said a large chunk of workers in their 20s and 30s weren’t saving enough to take full advantage of their employer’s 401(k) match.
“I thought, of course, it’s because they’re paying off their student loans,” he said. “If employers could spend that benefit money in a way that is more valued by their employees, then this could be really good for everyone.”
Aronson said employers commonly contribute $133.33 monthly — $33.33 allocated as withholding for the employee’s taxes, and $100 directed to debt payment.
If an employee had $31,000 in student debt, “an employer’s contribution of $100 a month can help them avoid more than 30 percent in principal and interest over the life of the loan, and can help get them out of debt in just over seven years instead of 10 years,” Aronson said.
A 717-person, millennial-focused survey sponsored by the company found that respondents said they were willing to stay at a job at least 36 percent longer if a company offered student loan repayment. The average respondent said they would value repayment services twice as much as 401(k) contributions or health insurance — and seven times more than free food at work.
“The companies are able to keep good people around by offering this benefit, and their employees are able to get out of debt sooner than they otherwise would,” Aronson said.
But it’s not yet something most companies are trying out: Just 3 percent of companies surveyed in a 2015 Society for Human Resources Management employee benefits report offered the perk.
1871 CEO Howard Tullman said entrepreneurs and member companies have said their employees want a service that would help with their loans. The incubator announced a health care and benefits exchange for its members in November.
“Everything that we’ve heard from the companies is they’re hearing it regularly and if there was a way to address this, and offer this as a retention tool and also as a recruitment tool, they would be very happy,” he said.