By Jim Holt
To attract and retain Millennials, companies across the country (including some credit unions) are expanding their employee benefit programs to include student loan refinance options and repayment assistance. With more than 40-million Americans having some level of student loan debt, this should come as no surprise.
According to a recent survey from ionTuition, nearly 80% of the individuals surveyed with student loan debt said they would like to work for a company that offers repayment assistance with a matching opportunity. In fact, 49% percent of respondents said they would prefer student loan payment contributions over a 401(k) at this point in time.
A Growing Trend in Refi and Repay
While student loan refinance and repayment assistance plans are relatively new to the marketplace, both are booming. In 2012, there was just one lender offering student loan refinancing for both federal and private student loans – but since then, more than a dozen lenders have entered the market. With more than $211 billion in outstanding student loan debt estimated to be addressable by lenders (based on a March 2015 Goldman Sachs report), and only $3 billion to $4 billion having been refinanced thus far, the refinance market is likely to expand even further.
In regards to repayment assistance plans, a number of large organizations including Fidelity, Aetna, and PricewaterhouseCoopers (PwC) have announced plans in recent months. In PwC’s case, employees will receive an additional $1,200 per year to go towards their student loans for a period of six years (or a total of $10,000).
In addition, multiple bills have been introduced in Congress that would create tax benefits for employers for either making qualified student loan payments on employees' behalf or reimbursing the employee for payments made, similar to the tax credits that exist now for employer tuition assistance.
An Opportunity for Credit Unions
In addition to repayment assistance, companies are also searching for attractive refinance options for their employees. Not surprisingly, some lenders are working hand in hand with repayment assistance firms to serve as a referral recipient for employees looking to refinance. SoFi has even taken a page from the historical playbook of credit unions, funding more than $1 billion in student loan refinancing to borrowers through 400 “corporate partners,” ranging from Microsoft to membership organizations.
Credit unions are turning to their own select employee groups (SEGs) to find similar opportunities. The $2.6-billion BCU in Vernon Hills, Ill. began offering a student loan refinance product in 2013 before expanding the program in late 2016.
“Student loan refinance is a very relevant product for millennials and a key benefit that we can promote to our SEGs,” said David Brydun, BCU Vice President of Consumer Lending. “With our employer-focused business model and more companies focusing on ways to help employees manage and reduce their student loan debt, we think this is a great fit and another way for us to provide value to our key business partners.”
BCU’s corporate relations and lending departments worked together to position the refi product as a desirable employee benefit and conducted meetings and informational webinars with key HR contacts to create awareness. The credit union also incorporated the loan into various financial well-being initiatives delivered to SEG's. According to Brydun, this effort and timing was critical, as the credit union had to fend off competition from fin tech startups who were attempting to forge loan referral relationships with the credit union’s SEGs.
With the strong historical ties and deep relationships that many credit unions have with SEGs, student loan refinance and repayment assistance may be a significant opportunity worth evaluating in 2017 and beyond.
Jim Holt is chief development officer with CU Student Choice.